Historical cost in relation to accounts means:

Cost of acquisition of the asset

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Purchase price, which includes cost of acquisition, transportation and installation

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Current market price of the asset

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None of the above

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Solution

The correct option is B Purchase price, which includes cost of acquisition, transportation and installation
Accounting cost concept states that all assets are recorded in the books of accounts at their purchase price, which includes cost of acquisition, transportation and installation and not at its market price.

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Explain Historical cost principle and consistency Assumption of accounting.

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The Historical cost or cost principle is not applicable to which of the following assets:

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