Capitalizing an expenditure rather than recording it as a revenue expenditure
A)impacts the total book value of plant assets reported on the balance sheet and the amount of net income reported during a period.
B)impacts the total book value of plant assets on the balance sheet, but has no effect on the amount of net income reported during an accounting period.
C)impacts the amount of net income reported during an accounting period, but has no effect on the total book value of plant assets on the balance sheet.
D)has no impact on the book value of plant assets on the balance sheet or the amount of income reported on the income statement.

Question

Quizplus · Accepted Answer

Capitalizing an expenditure means recording it as a long-term asset rather than as an expense in the current period. This increases the total book value of plant assets reported on the balance sheet. Since the expenditure is not expensed in the current period, it reduces the amount of net income reported during that period. Therefore, capitalizing an expenditure affects both the balance sheet and the income statement.

Capitalizing an Expenditure Rather Than Recording It as a Revenue