Answered: If a company captúrales a cost that…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

If a company captúrales a cost that should have been expensed.... A. Expenses will be overstated and net income will be understated in the years of the error B. Expenses will be understated and net income will be overstated in the year of the error C. Expenses and net income will be understated in the year of the error D. Expenses and net income will be overstated in the year of the error

Expert Solution

Explanation -

1. Capital Expenditure -

Capital Expenditure is incurred to acquired long term assets. Company incurred such huge expense to built, buy, maintain or improve the fixed assets. It is one time expenditure incurred by the organization.

2. Revenue Expenditure -

Revenue Expenditure is on the other hand recurring in nature. It is incurred by the organization to maintain operation of the entity.