If a Company Initially Records an Expense Incorrectly as an Asset,explain

question 31

Essay

If a company initially records an expense incorrectly as an asset,explain how this mistake affects the income statement and the balance sheet.

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Definitions:

Merchandising Company

A business that purchases finished products and sells those products to consumers.

Accounts Payable

Liabilities representing the amount a company owes to creditors for purchases made on credit.

Cash Inflow

Money entering a business, typically from operations, investments, or financing activities.

Cash Outflow

Refers to the payment of money in the form of cash or cash equivalents by a business for various purposes, including operating expenses, investment activities, and financing activities.