Incorrectly capitalizing an expense results in net income being overstated.

Name: Incorrectly capitalizing an expense results in net income being overstated.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Incorrectly capitalizing an expense means treating it as a long-term asset and depreciating it over time rather than expensing it in the current period. This results in lower expenses and higher net income, which can overstate the company's financial performance.

Incorrectly Capitalizing an Expense Results in Net Income Being Overstated