Two companies, Company A and Company B$,$ operate in the same industry. Company A

reports higher profits than Company B$.$ Upon further analysis, it is discovered that Company

A capitalizes a significant portion of its operating expenses, while Company B spends all

operating expenses immediately. Analyze the implications of these accounting practices on the

financial statements and compare the financial performance of both companies.

Company A

Company B

Revenue

Rs $20,00,000$

Revenue

Rs $18,00,000$

A Operating Expenses

$($after capitalization$)$

Rs $12,00,000$

Operating Expenses

$($after capitalization$)$

Rs $15,00,000$

Non$-$Operating

Expenses

Rs $1,00,000$

Non$-$Operating

Expenses

Rs $80,000$

Net Income

Rs $8,00,000$

Net Income

Rs $2,20,000$

Total Assets

Rs $50,00,000$

Total Assets

Rs $45,00,000$

Total Liabilities

Rs $20,00,000$

Total Liabilities

Rs $18,00,000$