The decision to expense or capitalise an item is important because:
A) It may have direct implications for the value of the organisation and wealth of managers.
B) It may have an impact on contractual arrangements that are based on accounting numbers related to profits and/or assets.
C) It may give managers scope to maximise personal wealth, in line with Positive Accounting Theories.
D) All of the given answers are correct.

Question

Quizplus · Accepted Answer

The decision to expense or capitalise an item affects the financial statements and, consequently, can influence the organization's reported value, impact contractual agreements tied to accounting figures, and provide managers with opportunities to enhance their personal wealth, aligning with the concepts of Positive Accounting Theory.

The Decision to Expense or Capitalise an Item Is Important