PRC-1 · Chapter 8 · Question 24 of 100
Revenue expenditure of Rs. 20,000 for routine vehicle maintenance was incorrectly capitalized to the Motor Vehicles account. What is the impact on the financial statements before correction?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Assets are overstated, Profit is overstated
Explanation
Capitalizing an expense artificially inflates the value of assets on the balance sheet and omits the expense from the income statement, artificially inflating the profit.
More Correction of Errors MCQs
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