wiz-icon
MyQuestionIcon
MyQuestionIcon
1
You visited us 1 times! Enjoying our articles? Unlock Full Access!
Question

The concept which states that assets when purchased should be recorded at cost price is known as ___________ .

A
Cost concept
Right on! Give the BNAT exam to get a 100% scholarship for BYJUS courses
B
Realization concept
No worries! We‘ve got your back. Try BYJU‘S free classes today!
C
Going concern concept
No worries! We‘ve got your back. Try BYJU‘S free classes today!
D
Entity concept
No worries! We‘ve got your back. Try BYJU‘S free classes today!
Open in App
Solution

The correct option is A Cost concept

The cost concept requires that all assets are recorded in the book of accounts at their purchase price, which includes cost of acquisition, transportation, installation and making the asset ready to use.

For example, an old plant was purchased for Rs. 50 lakh, which is into the business of manufacturing detergent powder. The following were the other expenses incurred for its installation:

1. Transporting the plant to the factory site- Rs. 10,000

2. Repairs for bringing the plant into running position- Rs. 15,000

3. Installation- Rs. 25,000

The total amount at which the plant will be recorded in the books of account would be the sum of all these, i.e. Rs. 50,50,000.


flag
Suggest Corrections
thumbs-up
0
Join BYJU'S Learning Program
similar_icon
Related Videos
thumbnail
lock
Introduction to Profitability Ratios
ACCOUNTANCY
Watch in App
Join BYJU'S Learning Program
CrossIcon