Which of the following would not overstate current-period net income?
A)Capitalizing an expenditure that should be expensed.
B)Failing to record a liability for an expenditure.
C)Failing to record a check paying an item in vouchers payable.
D)All of the above would overstate net income.

Question

Quizplus · Accepted Answer

Failing to record a check paying an item in vouchers payable would not overstate net income as it would simply result in an understatement of the payable account and therefore, an understatement of expenses. Option A would overstate net income as capitalizing an expenditure would increase assets and therefore, result in higher net income. Option B would overstate net income as failing to record a liability would result in an understatement of expenses and therefore, higher net income.

Which of the Following Would Not Overstate Current-Period Net Income