Accounting for IGCSE & O level - Accounting Procedures (Section 24 - No. 20)
What is the impact on profit when a revenue expenditure is incorrectly capitalized as a capital expenditure?
Profit is understated in the current period.
Profit is overstated in the current period.
Profit is unaffected in the current period.
Profit is overstated in later periods.
Explanation
Because the expense is not recognized immediately, the profit is initially overstated.
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