If a capital expenditure is treated as a revenue expenditure,then:
A)expenses are overstated and owners' equity is understated.
B)expenses are understated and assets are overstated.
C)expenses are understated and owners' equity is overstated.
D)net income is overstated and owners' equity is understated.

Question

Quizplus · Accepted Answer

When a capital expenditure is incorrectly treated as a revenue expenditure, it results in higher expenses being recorded, which reduces net income and consequently understates owners' equity.

If a Capital Expenditure Is Treated as a Revenue Expenditure,then