When should an expenditure be recorded as an asset rather than an expense?
A) Never.
B) Always.
C) If the amount is material.
D) When future benefit exists.

Question

Quizplus · Accepted Answer

An expenditure should be recorded as an asset when future economic benefit exists. This means that the item purchased will provide a benefit to the company beyond the current accounting period. If no future benefit exists, the expenditure should be recorded as an expense in the current period. Choices A and B are incorrect because there are circumstances where an expenditure should be recorded as an asset rather than an expense. Choice C is not entirely accurate; the materiality of an expenditure is a factor to be considered, but it is not the sole determining factor.

When Should an Expenditure Be Recorded as an Asset Rather