Question

Since expenses are the costs of doing business and cause equity to _______ , expenses are increased on the _________ side of their T-account.

Answer 1

Expenses decrease equity and are recorded on the debit side of their T-account. They represent costs involved in running a business and impact the accounting equation by reducing owner's equity.

Step-by-step explanation:

Since expenses are the costs of doing business and cause equity to decrease, expenses are increased on the debit side of their T-account. In accounting, the double-entry system is used where every transaction affects at least two accounts. Expenses reduce the owner's equity because they represent the money spent or resources used up to generate revenue. Therefore, when you record an expense, you increase the expense account with a debit, and because expenses decrease equity, this is consistent with the accounting equation where Assets = Liabilities + Equity.