A Company's Accountant Capitalized a Payment That Should Be Recorded

question 44

Multiple Choice

A company's accountant capitalized a payment that should be recorded as a revenue expenditure. How will this error affect the financial statements of the company?

• A)Net income will be overstated.
• B)Revenues will be understated.
• C)Assets will be understated.
• D)Liabilities will be understated.

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Definitions:

Recency Effect

The tendency for a perceiver to rely on recent cues or last impressions.

Performance Evaluation

The process of assessing an employee's job performance against predefined criteria to provide feedback, guide further development, and make decisions about promotions or rewards.

Typical Attributes

Common characteristics or qualities that are generally observed or expected in a particular context or entity.

Perceive

The process of becoming aware or understanding something through the senses.