Final answer:
The associated costs are transferred to an expense (cost) account, which ultimately reduces equity, not to an income, asset, or liability account directly. In the case of a bank's T-account, these expenses will reduce net worth and thus affect the bank's equity.
Step-by-step explanation:
The associated costs are transferred to expense (cost) account. When a company incurs costs, these are recorded as expenses, which reduce equity. However, these costs are not recorded in an income account, asset account, or liability account directly. Instead, they're recorded as expenses, which reflect the consumption of assets or services that are used to generate revenue. Over time, expenses are closed out to equity, specifically in the retained earnings account, which is part of the owner's equity section of the balance sheet.
In the context of a bank's T-account, the costs associated with the bank's operations would reduce the bank's net worth, which is calculated as total assets minus total liabilities. Since net worth is included on the liabilities side, expenses reduce net worth, thus reducing equity. The fundamental accounting equation where assets equal liabilities plus net worth still prevails.