Question

What is the impact of depreciation understatement on the income statement?

1) Increases net income
2) Decreases net income
3) Has no impact on net income
4) Cannot be determined

Answer 1

Depreciation understatement increases net income on the income statement.

Step-by-step explanation:

The impact of depreciation understatement on the income statement is that it increases net income. Depreciation is an accounting method used to allocate the cost of an asset over its useful life. By understating depreciation, less expenses are recognized in the income statement, which increases net income.