The effect of capitalising expenditures is to:
A) decrease current period profit, increase current period assets and decrease future period equity.
B) increase current period profit, increase current period assets and decrease future period profit.
C) increase current period profit, decrease current period assets and decrease future period liabilities.
D) increase current period profit, increase current period equity and increase future period profit.

Question

Quizplus · Accepted Answer

Capitalising expenditures means recording them as assets rather than expenses. This increases current period assets and profit (since expenses are lower), but decreases future period profit as the asset is amortized or depreciated.

The Effect of Capitalising Expenditures Is To