Which of the following is a correct statement regarding the expensing or capitalization of items?
A) Most companies expense all material costs above a certain amount, even if they are capital items.
B) A conservative policy regarding expensing of items is one that avoids understating assets.
C) The distinction between a capital expenditure and an immediate expense is clear cut.
D) A conservative policy regarding expensing of items is one that avoids overstating profits.

Question

Quizplus · Accepted Answer

A conservative policy regarding expensing of items is one that avoids overstating profits. This ensures that the company's financial statements reflect a more accurate picture of the company's financial health, which is important for making sound business decisions. The distinction between a capital expenditure and an immediate expense is not always clear cut and can vary depending on the accounting standards and guidelines being followed. Most companies follow a policy of capitalizing items above a certain amount, but this amount can vary and is not necessarily always followed.

Which of the Following Is a Correct Statement Regarding the Expensing