The various assets acquired by a concern or firm should be recorded on the basis of the actual amounts involved or spent. This is the assertion of ______________.
The various assets acquired by a concern or firm should be recorded on the basis of the actual amounts involved or spent. This is the assertion of ______________.
The correct option is B 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.
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.
