An investment company has securities as current assets having market value substantially lower than the cost price. The company continues to show them at cost. Which principle is violated , explain the principle and the effects of following it?
Answers
Answer:
Principle violated is Historical cost concept.
The historical cost concept (also known as cost principle of accounting) states that the assets and liabilities of a business should be presented in accounting records at their historical cost.
Historical cost is the amount that is originally paid to acquire the asset and may be different from the current market value of the asset.
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Answer:
Principle violated is Historical cost concept.
The historical cost concept (also known as cost principle of accounting) states that the assets and liabilities of a business should be presented in accounting records at their historical cost.
Historical cost is the amount that is originally paid to acquire the asset and may be different from the current market value of the asset.