Accounting for IGCSE & O level - Accounting Procedures (Section 21 - No. 34)
What are the effects of an error where a capital expenditure is wrongly classified as a revenue expenditure?
The value of non-current assets will be understated.
Expenses will be overstated in the income statement.
Profit for the year will be understated.
The financial position of the business will improve.
Explanation
This error leads to immediate expense recognition, understating assets and profit.
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