So, if the capital expenditure and revenue expenditure were recorded incorrectly in the accounting report, the budget amount may still be in balance, but the balance amount will not be the same. We must understand that capital spending will increase the amount of fixed assets, while revenue spending will increase expenses and therefore decrease profit. When a capital expenditure is treated as a revenue expenditure, incorrectly accounting for a capital expenditure as a revenue expenditure will affect expense, asset and depreciation accounts. The initial journal entry overestimates expenses and underestimates resources. For example, a journal entry for the purchase of an asset debits an asset account and credits cash. Incorrect taking of income and expense recording debits expenses and credits cash. Capital assets are also depreciated on a regular basis, so misclassifying an asset underestimates depreciation expenses over time. The profit will decrease and the total balance amount will decrease