14. Ramesh Printers purchases a printingmachine for 27 lakhs on 1 st April 2018The market price of the machine on 31stMarch, 2019 was 32 lakhs. The companyvaldes the firm at Rs.32 lakh whilepreparing its Balancesheet. Whichaccounting principle does the firm violate??(1 Point)
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Answer :-
Cost concept or Historical cost Principle
Explanation :-
The firm has violated cost concept principle according to which an asset is record in the books of accounts at the cost at which it is purchased.
Printing machine is an asset for the business and since the original purchase price of the printing machine was 27 lakh but the company has record it for Rs. 32 lakh which is not possible. An asset can lose some value but can't gain.
Assets are depreciated over use and time. Depreciation is charged systematically after at fixed intervals of time.
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