Chapter 1, Problem 1.14BYP

(1)

To determine

Expenses: Expenses refer to the cost incurred on the necessary purchases of the fixed assets by the firm, or the production of the goods and services, during the accounting period.

Capital: Capital is the owner's equity introduced in the business; hence it is shown in the balance sheet.

To Identify: The factors to be considered while deciding to record an expense as capital or expense.

(2)

To determine

To Identify: The constraint that could cause the company to alter its decision, if any.