A company's accountant capitalized a payment that should be recorded as a revenue expenditure. How will this error affect the financial statements of the company?

Question

Quizplus · Accepted Answer

Capitalizing a payment that should be recorded as a revenue expenditure means that the expense is recorded as an asset rather than being expensed immediately. This results in an overstatement of net income because expenses are understated in the current period.

A Company's Accountant Capitalized a Payment That Should Be Recorded