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For those who know fundamentals of accountancy..

Case below, support your answer with applicable accounting principles.

During the period, the business acquires an equipment costing $300,000 in cash. The business owner is questioning why you, as his accountant, did not include the $300,000 equipment as one of the items of operating expenses in the statement of comprehensive income which resulted a higher Income tax of the business. How would you explain it to the owner?​

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Answer:

An equipment acquired by the company forms part of its assets and should not be treated as operating expense. Thus, it should not be included in the statement of comprehensive income, rather, it is part of the company's balance sheet under its non-current assets.

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