Accounting for IGCSE & O level - Accounting Procedures (Section 13 - No. 35)
An expenditure is incorrectly recorded as a revenue expenditure instead of a capital expenditure. What effect will this error have on the company's current year's profit and financial position?
Profit is overstated and non-current assets are understated.
Profit is understated and non-current assets are overstated.
Profit is understated and non-current assets are understated.
Profit is overstated and non-current assets are overstated.
Explanation
This error will lead to a decrease in the value of non-current assets. This will also lead to understated profit.
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