Accounting for IGCSE & O level - Accounting Procedures (Section 5 - No. 4)
If a capital expenditure is incorrectly recorded as a revenue expenditure, which of the following occurs?
Expenses are understated, and profit is understated.
Expenses are overstated, and profit is understated.
Expenses are understated, and profit is overstated.
Expenses are overstated, and profit is overstated.
Explanation
Incorrectly recording a capital expenditure as revenue expenditure leads to overstated expenses and an understated profit.
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