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When an accumulated depreciation is charged to total assets. lets say by year end acc depreciation reduces assets by $1000, how does equity and liability side reduces to balance this. Do the retained earning reduce ?
Each year the depreciation charge increases the accumulated depreciation which in turn reduces the carrying value (NBV) of the asset.
The depreciation charge is an expense which reduces the profit in the SOPL which in turn reduced the retained earnings (which are part of the equity).Again, all of this is explained in my free lectures. The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
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