Treat the cost as an asset or expense

Reference no: EM133657828

Question

When a firm incurs costs on an item to be used in operations, management must decide whether to treat the cost as an asset or an expense. Assume that a company used cash to acquire machinery expected to contribute to the generation of revenues over a three-year period and the company erroneously expensed the cost to acquire the machine. Explain how the error would affect the statement of cash flows.

Reference no: EM133657828

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