When expenses are incurred what is the effect on the accounting equation?

When expenses are incurred, they decrease net income, which ultimately reduces retained earnings in the equity section of the accounting equation. This leads to a decrease in total assets or an increase in liabilities, depending on whether the expenses are paid immediately or accrued. Thus, the accounting equation (Assets = Liabilities + Equity) remains balanced, reflecting the impact of the expenses on both sides of the equation.