A-LevelAccountingThe accounting cycle9706/12 · May/June 2010 · Q11 Mark

An item of capital expenditure has been incorrectly treated as revenue expenditure in the accounts of a business. What is the effect of this error on the accounts of the business?

Aassets overstated profit overstated

Bassets overstated profit understated

Cassets understated profit overstated

Dassets understated profit understated

✓ Correct answer

D: assets understated profit understated

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Topic: The accounting cycle, A-Level Accounting (syllabus 9706). Multiple choice, 1 mark.
Source: A-Level Accounting, May/June 2010 Paper 1 Variant 2, question 1.

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