My query which I seem to have answered myself relates to adjusting Financial Statements, capitalised back to the expensed (ie what they would have been like w/o the capitalisation). The query concerned adjustment required to equity when net assets have been adjusted down by amount X. I realise why Equity needs to be adjusted. Assets have gone down and to offset, given no change in Liabilities we have to decrease equity. I was confused by how much though, since I was worried that since our expenses have gone up, our net Income will be affected and thus affect retained earnings. The rationalization i reached was that the amount of adjustment to be done to Equity is X after all. That amount can be reached by analysing the Balance sheet side of the equation: Assets go down, so equity goes down. Or we can come to X by analysing the effect on income, and therefore the affect on Retained Earnings. Either way the amount, X, will be the same and should not be counted twice. Does anyone have anything to add or comment on based on my above epiphany? Thanks…
Impact of Captializing vs. Expensing (Early Years): non current Asset goes up, because an Asset is created when capatilizing Current Assets stay the same Revenue stays the same Expenses are down compared to Expensing because you are not expensing the whole asset at once, you are spreading ithe cost out. thus if expenses are down, profit is up, if profit is up, retained earnings are up thus Equity is up. Help that helps. (UP) A = L + E (UP)