Question

Calculate the value of the asset at the time of preparing final account that is purchased for Rs. 5,00,000 ,if the market value is Rs. 7,00,000 as per the cost concept.
a. Rs. 5,00,000
b. Rs. 7,00,000
c. Rs. 1,20,000
d. Rs. 2,00,000

Answer 1

Answer:

a )  5,00,000

Explanation:

Because in cost concept we have to carry the loss first

Answer 2

The value of assets at the time of preparing the final account is Rs. 5,00,000

• The purchase amount is Rs. 5,00,000 and the total market value is Rs. 7,00,000
• According to the cost principle, an asset's overall worth should be documented at its original cost in the books of accounts.
• This indicates that an asset is recognised and valued in the financial statements using the cost of the asset at the time of acquisition.
• This concept is a crucial accounting idea that aids in creating a consistent and accurate record of a company's financial transactions and status.
• This means that even though the asset's market worth is Rs. 7,00,000, its value will be recorded at its original cost only which is Rs. 5,00,000.
• This is the value when the final accounts are prepared.
• Therefore, Rs. 5,000,00 would be listed as the asset's value in the final accounting.

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