Question

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 asset comes down to Rs. 90,000, it will ordinarily continue to be show at Rs. 1,00,000 and not at Rs. 90,000 due to _______________.

• A. Realization concept
• B. Present value concept
• C. Cost concept
• D. Money measurement concept

Answer 1

The correct option is C Cost concept

Cost Concept states that an asset should be recorded at its cost price. Therefore, in this case, asset shall be recorded at 100,000 and market price shall be taken into consideration.