Multiple choice

Which of the following will lead to understatement of net profit?

  1. Amortization of fictitious assets

  2. Treating capital expenditure as revenue expenditure

  3. Treating revenue expenditure as capital expenditure

  4. Creation of general reserve

Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Correct Answer: Treating capital expenditure as revenue expenditure will lead to more expenditures and thus, profits would be understated.