What is the expected outcome of recognizing expenses in accounting?

Recognizing expenses in accounting leads to a decrease in owner's equity. This occurs because expenses are deducted from the revenue, ultimately lowering the net income for the period. Since net income is a component of retained earnings within owner's equity, any increase in expenses directly reduces the total retained earnings. This means that the overall financial position of the company reflects a reduction in the owner's equity due to the outflow of resources represented by expenses.

In general accounting practice, expenses are recorded on the income statement and impact the profit or loss for the period. The net income derived from revenues minus expenses is what ultimately influences retained earnings in the equity section of the balance sheet. As expenses increase, assuming revenues stay the same or decrease, the resulting profit becomes lower, leading to diminished retained earnings and thus a decrease in overall owner's equity.