Final answer:
Using up $5,000 of an existing asset results in a decreased value in that asset's account, which must be reflected on a company's balance sheet. It is essential to maintain a balanced T-account where assets always equal liabilities plus net worth.
Step-by-step explanation:
When a company uses up $5,000 of an existing asset, its balance sheet is affected. An asset reduction means that a corresponding entry on the opposite side of the T-account must be made. This could be a decrease in cash or an increase in expenses. The reduction is reflected on the balance sheet to show the true value of the company's assets after the adjustment.
In the provided scenario, Singleton Bank's assets would be noted as changing with a reduction in the specific asset used. It is important that the T-account remains balanced with assets equaling liabilities plus net worth. If the asset used was cash, reserves would decrease. If it was a different type of asset, that particular asset account would correspondingly decrease.
Moreover, the reduction in assets would not change the liabilities side of the balance sheet unless it was to pay off a liability. An accurate adjustment ensures that the bank's financial statements accurately represent the company's financial position after the asset use.