Accounting for IGCSE & O level - Accounting Procedures (Section 14 - No. 30)
What is the primary impact on a business when a revenue expenditure is incorrectly capitalized (treated as a capital expenditure)?
Profit is understated in the current period.
Assets are undervalued on the balance sheet.
Profit is overstated in the current period.
The business is more likely to get a loan.
Explanation
Capitalizing an expense delays its recognition, increasing current profit.
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