The erroneous recording of a revenue expenditure as a capital expenditure will cause an overstatement of net income for the period.

Question

Quizplus · Accepted Answer

When a revenue expenditure is mistakenly recorded as a capital expenditure, it is treated as if the amount spent is an investment in a long-term asset rather than an expense incurred during the current period. This causes an overstatement of net income for the period due to the incorrect capitalization of expenses.

The Erroneous Recording of a Revenue Expenditure as a Capital