Question

Which of the following will be recorded in the books of accounts on the basis of cost concept?

• A. An asset at its cost
• B. Skills and knowledge acquired by business manager
• C. Quality control in the firm
• D. Accidental death of the General Manager of the firm

Answer 1

Answer: (A)

An asset at its cost

There are two concepts which will portray A as the correct option to us.

1. Money Measurement Concept- Money Measurement Concept in accounting, also known as Measurability Concept, means that only those transactions and events, that are capable of being measured in monetary terms, are recognized in the financial statements. In the above case, only option A can be expressed in terms of money.

2. 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. Hence, it shall be recorded at its cost.