CameraIcon

SearchIcon

MyQuestionIcon

1

You visited us 1 times! Enjoying our articles? Unlock Full Access!

Preparation of Statement of Profit and Loss

Book value ...

Question

Book value & Market value of machinery on 31.3.2019 was Rs.1,00,000 & Rs.1,10,000 respectively. As on 31.3.2019, if the company values the machinery at Rs. 1,10,000, which of the following principle is not being followed _________________.

A

Historical Cost

Right on! Give the BNAT exam to get a 100% scholarship for BYJUS courses

B

Present Value

No worries! We‘ve got your back. Try BYJU‘S free classes today!

C

Realisable value

No worries! We‘ve got your back. Try BYJU‘S free classes today!

D

Current Cost

No worries! We‘ve got your back. Try BYJU‘S free classes today!

Open in App

Solution

The correct option is A Historical Cost
Historical cost concept states that an asset should be recorded at its purchase price. Here it is valued at market value therefore, Historical Cost Concept is being violated.

Suggest Corrections

thumbs-up

0

Similar questions

Q. Mohan purchased a machinery amounting Rs.10,000 on 1.4.2010.
On 31.3.2019, similar machinery could be purchased for Rs.20,000 but the realizable value of the machinery (purchased on 1.4.2010) was estimated at Rs.15,000. The present discounted value of the future net cash inflows that the machinery was expected to generate in the normal course of business, was calculated as Rs 12,000.
The historical cost of machinery is ____________.

Q. A machinery was purchased on 1st April, 2005, for Rs.

10, 00, 000

. Its installation charges were Rs.

1, 00, 000

. But its market value as on 31st March 2006, was Rs.

13, 00, 000

. If the company shows the machinery at Rs.

13, 00, 000

in its B/S, which of the following concepts is not followed by the company?

Q. Mr. A purchased a machinery costing Rs.

1, 00, 000

1^{s t}

2005

. Transportation and installation charges were incurred amounting Rs.

10, 000

4, 000

respectively. Dismantling charges of the old machine in place of which new machine was purchased amounted Rs.

10, 000

. Market value of the machine was estimated at Rs.

1, 20, 000

31^{s t}

2006

. While finalising the annual accounts, A values the machinery at Rs.

1, 20, 000

in his books.
Which of the following concepts are violated by A?

Q. If a machinery is purchased for Rs.1,00,000 the asset would be recorded in the books at Rs.1,00,000 even if its market value at that time happens to be Rs.1,40,000. In case a year after, the market value of this assets comes down to Rs.90,000, it will ordinarily continue to be shown at Rs.1,00,000 and not at Rs.90,000 due to _________________.

Q. A purchased a machinery amounting to Rs.15,00,000 on 1st April, 2000. On 31st March, 2006, the similar machinery could be purchased for Rs. 25,00,000. The present discounted value of the future net cash inflows of that machinery was calculated as Rs. 13,00,000.
On the basis of above the historical cost of machinery is ___________.

View More

Join BYJU'S Learning Program

similar_icon

Related Videos

lock

Statement of Profit and Loss

ACCOUNTANCY

Watch in App

explore_more_icon

Explore more

Preparation of Statement of Profit and Loss

Standard XII Accountancy

Join BYJU'S Learning Program

CrossIcon