A Company's Accountant Capitalized a Payment That Should Have Been

question 83

Multiple Choice

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

• 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:

Inverse Relationship

A correlation where an increase in one variable leads to a decrease in another variable, or vice versa.

Trial-And-Error

A problem-solving method involving repeated, varied attempts which are continued until success, or until the agent stops trying.

Formal Operational Thought

In Piaget’s theory, the fourth and final stage of cognitive development, characterized by more systematic logical thinking and by the ability to understand and systematically manipulate abstract concepts.

Metacognition

The awareness and understanding of one's own thought processes, often referred to as "thinking about thinking."