Improperly classifying large expenditures as assets rather than expenses
A)could constitute fraud.
B)understates income for the period.
C)understates equity on the balance sheet.
D)results in none of these options.

Question

Quizplus · Accepted Answer

Improperly classifying large expenditures as assets rather than expenses could be considered fraud, as it misrepresents the true financial position of the company. This is because assets are recorded on the balance sheet and increase the company's value, while expenses are recorded on the income statement and decrease the company's net income. Therefore, classifying an expense as an asset could overstate the company's assets and understate its expenses, and thus its true financial position.

Improperly Classifying Large Expenditures as Assets Rather Than Expenses