Which Of The Following Statements Is (Are) Accurate Regarding Equipment Purchased Within A Business? (Check All That Apply.)

The correct options of this multiple choice question (mcq) are A, B, C and E as Equipment (E) is reported on the left side or assets side of Accounting Equation. For example, if a company purchased equipment for cash $6,000, then we debit equipment account and credit cash account with the amount of $6,000. The effect of this Business Transaction on the accounting equation is shown below:

                             Assets                     =     Liabilities    +   Equity

                +Equipment   -Cash            =  

                   +$6,000      -$6,000          =

Here E recorded on asset side which is increased by $6,000 and cash is decreased by $6,000 and the accounting equation remains in balance.

Equipment is a Tangible Fixed Asset / Tangible Non-Current Assets which is reported on the balance sheet as the business expects to receive probable future economic benefits by using it in the business such as by using it, the daily working is continued during business hours and as a result the business will generate revenues from its usage. Initially, when it is purchased, it is capitalized i.e., it is a Capital Expenditure, whose cost initially recorded a Non Current Asset on balance sheet then charged to expense due to wear and tear and its usage over a period of its useful life. In other words, its cost is systematically allocated over its useful. The entry to record for depreciation expense is to debit depreciation expense account and credit accumulated depreciation account. Accumulated Depreciation on Equipment is a Contra Asset Account which is deducted from the cost of equipment on balance sheet. Depreciation on it is calculated by applying different Depreciation Methods such as Straight-Line Method, Written-Down Method, etc.

The option D is incorrect as when initially, it is purchased it is treated as a capital expenditure and not Revenue Expenditure which is entirely charged to expense in the period in which it is incurred.