Final answer:
The correct effect on the accounting equation when an accrued expense isn't recorded is that assets and equity remain unchanged, and liabilities decrease because the incurred expense has not been properly accounted for as a liability.
Step-by-step explanation:
The question pertains to the accounting equation and the impact on it if an accrued expense isn't recorded correctly. When an accrued expense is not recorded, it means that an expense has been incurred but not yet paid, and hence, liability, in this case, has not been recognized. The correct statement regarding the effect on the accounting equation when an accrued expense isn't recorded is 'Assets and equity remain unchanged; liabilities decrease (Option D).' This is because the expense that should have been recorded would increase liabilities and decrease equity due to a reduction in net income. However, by not recording the accrued expense, both assets and equity remain temporarily overstated, and liabilities are understated because the obligation to pay has not been acknowledged in the accounts.