When Raphael Corp. incorrectly mentioned an expense of equipment addition instead of capitalizing the effect of the same, then in such case, the net income of the company is understated in the financial statements.
What is net income?
The income which is left at the end of an organization at the end of a financial period after making all the regulatory and compliant payments and deductions, such as taxes and depreciation, it is known as net income.
Hence, the significance of net income is aforementioned.
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