Can someone explain to me what balances out the reduction in Net income and consequently stockholders equity when you subtract out the full lease payments on an operating lease. The stockholders equity would be reduced be the lower retained earnings but since you dont put the lease on the balance sheet at all how does the equation Assets=liabilities+Equity remain balanced?
Yes it does. If NI is reduced by the expense, E would be lower but would be compensated by the increased L for the expense if purchased on credit, or the decrease in A if purchased in cash. I
and there it is, thank you, in my Acedemic mindset I forgot that in the real world you actually have to pay for these things with something, not just an entry. Thanks again.