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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

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B

Present Value

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C

Realisable value

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D

Current Cost

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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.

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