If a Revenue Expenditure Is Incorrectly Recorded on a Company's

question 145

Multiple Choice

If a revenue expenditure is incorrectly recorded on a company's books as a capital expenditure,which of the following statements will be true?

• A)Stockholders' equity will be overstated at year end.
• B)Net income in the following year will be unaffected.
• C)Total assets will be understated at year end.
• D)Net income will be understated for the year.

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Definitions:

Budgeted Direct Materials Purchases

The estimated total cost of direct materials a company plans to buy for its production process, based on forecasted production levels.

Ending Inventory

The total value of all inventory a company has in stock at the end of an accounting period.

Financial Budgets

Detailed plans that outline an organization's financial goals, expected revenues, and expenses for a specific period.

Cash Budget

A budget that estimates the expected receipts (inflows) and payments (outflows) of cash for a period of time.