If a company incorrectly records a payment as an asset instead of an expense,how will this error affect net income in the current period?
A)Net income will be too high.
B)Net income will be too low.
C)Net income will not be affected by this error in the current period,but will be too low in a later period.
D)Net income will never be affected by this error because assets are reported on the balance sheet.

Question

Quizplus · Accepted Answer

Because the company recorded an asset instead of an expense,it understated its expenses and,as a result,overstated its net income.

If a Company Incorrectly Records a Payment as an Asset