Accounting for IGCSE & O level - Accounting Procedures (Section 18 - No. 7)
What is the impact on the financial statements if a revenue expenditure is incorrectly capitalized?
Expenses are understated, and profit is overstated in the current period.
Assets are understated in the balance sheet.
Profit is understated in the current period.
Liabilities will appear to increase.
Explanation
Incorrectly capitalizing will delay expense recognition, thus overstating current profit.
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