Treating a cost which should be an expense as a capital expenditure will make a company's net income higher.

Question

Quizplus · Accepted Answer

Capital expenditures are typically recorded as assets on the balance sheet and are not immediately recognized as expenses on the income statement. This can result in higher net income in the short term, as the costs are spread out over the useful life of the asset rather than expensed all at once. However, this method of accounting can result in lower net income in future periods as depreciation expense is recorded.

Treating a Cost Which Should Be an Expense as a Capital