Practice Quiz

Financial Planner

Category - General Principles of Financial Planning

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Between the balance sheet and the income statement, which financial statement(s) is/are impacted by depreciation?
  1. The balance sheet
  2. The income statement
  3. Neither is impacted.
  4. Both are impacted.
  5. There is not enough information to determine the impact.
Explanation
Answer: D - Both the balance sheet and the income statement are impacted by depreciation.

Key Takeaway: Depreciation increases accumulated depreciation, which is shown on the balance sheet. The depreciation expense is shown on the income statement, which reduces net income.
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