2 . 2 A well - known accounting malpractice is to book expenses as investment . An example was World Com , which tried to book " line costs " ( interconnection expenses with other telecommunication companies ) as capital expenditures instead of expenses . ( ! ) If Prufrock , of the Chapter 3 spreadsheet , incurs 550 million of Expenses in 2005 , then how do the financial statements change ? How do the Profit Margin , ROE , ROA Change ? ( 11 ) If Prufrock allocates this a capital expenditure , how does the balance sheet change ?" How do the Profit Margin , ROE , ROA Change ?" ( iii ) Does the firm look better under ( 1 ) or ( in )