Incorrect Capitalisation of Expenses Is a Means of Creative Accounting

question 12

Multiple Choice

Incorrect capitalisation of expenses is a means of creative accounting that:

• A)overstates revenues.
• B)understates revenues.
• C)understates net income.
• D)overstates net income.

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Definitions:

Drive Theory

A psychological theory that attributes motivation to be the result of biological or physiological needs that drive behavior towards satisfying those needs.

Expectancy Theory

A motivation theory that explains how individuals choose behaviors, predicting that people will choose the behavior that entails the most desirable outcomes to them.

Self-Interest Theory

A theory suggesting that human actions are motivated by personal gain, positing that individuals are primarily driven by self-serving interests even in decisions that appear altruistic.

Consumer's Actual

The real or existing state of consumption behavior and patterns exhibited by an individual or group, as opposed to their potential or intended actions.