Mr. N purchased a furniture costing Rs. 13,000 on 1st October, 2018. Transportation and installation charges were incurred amounting Rs. 1,300 and Rs. 520 respectively. Dismantling charges of the old furniture in place of which new furniture was purchased amounted Rs. 1,300. Market value of the furniture was estimated at Rs. 15,600 on 31st March 2019. While finalizing the annual accounts, Mr. N values the furniture at Rs. 15,600 in his books. Which of the following concepts was violated by Mr. N?

Realization concept

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Cost concept

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Matching concept

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Periodicity concept

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Solution

The correct option is A Cost concept
As per the Cost Concept, An asset shall be recorded at its historical cost. Here it is recorded at its Market price. Therefore, the cost concept is being violated.
Here, the cost is 13000+1300+520+1300 = 16120
Market price = 15,600.
The asset should be recorded in 16,120.

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