If a capital expenditure is treated as a revenue expenditure,then
A)expenses are overstated and owners' equity is understated.
B)expenses are overstated and assets are overstated.
C)expenses are understated and owners' equity is overstated.
D)net income is overstated and owners' equity is understated.

Question

Quizplus · Accepted Answer

When a capital expenditure is incorrectly treated as a revenue expenditure, it increases expenses, reducing net income and thus understating owners' equity.

If a Capital Expenditure Is Treated as a Revenue Expenditure,then