Question

Which of the following would cause total assets to decrease and total expenses to increase?

A. Recording the depreciation of equipment
B. Recording the consumption of supplies
C. Recording the expiration of prepaid rent
D. All of the above

Answer 1

The answer is d all of the above.
Reason:
Recording depreciation causes the asset of equipment to decrease as it is a reduction in the book value of the asset. Therefore total assets decrease. It also is an increase in expenses (though non-cash).

Recording the consumption of supplies means the business has less supplies on hand, therefore less total assets, this is also an expense to the business.

Lastly, prepaid rent represents expenses paid ahead of the period in which they are actually incurred and since in accounting the aim is to match revenues with expenses, prepaid rent will be recorded as an asset in the periods where it is prepaid. When it is the actual period where the expense is incurred, then the asset of prepaid rent is decreased and the expense is now recognized in its correct accounting period.

Answer 2

The right answer choice is Option-(D). All of the above would have that effect.

What would cause total assets to decrease and total expenses to increase?

Recording the depreciation on the equipment would reduce the value of the fixed assets and increase the depreciation expenditure.

Recording consumption of supplies would reduce the value of the supplies and increase the supplies expense.

Recording the expiration of prepaid rent would reduces the balance of prepaid rent and increase the rent expense.

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