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SSC Financial and Cost Accounting P-1 QUESTION #6131
Question 1

An item of capital expenditure was incorrectly treated as revenue expenditure. What is the effect on non-current assets and the loss for the year?

OptionNon-current AssetsLoss for the Year
AOverstatedOverstated
BOverstatedUnderstated
CUnderstatedOverstated
DUnderstatedUnderstated
  • Option A
  • Option B
  • Option C✔️
  • Option D
Correct Answer Explanation

Option C is correct.

  • Asset not capitalised → Non-current assets understated.
  • Full cost charged as expense → expenses increase → loss increases → Loss overstated.