Incorrect capitalisation of expenses is a means of creative accounting that:
A)overstates revenues.
B)understates revenues.
C)understates net income.
D)overstates net income.

Question

Quizplus · Accepted Answer

Incorrect capitalisation of expenses means that expenses are recorded as assets on the balance sheet instead of being immediately expensed on the income statement. By doing so, the expenses are not immediately deducted from revenues, which overstates net income.

Incorrect Capitalisation of Expenses Is a Means of Creative Accounting