Question

Fixed Assets are not shown at their realizable value in accounts because of
(a) Concept of Objectivity
(b) Matching cost
(c) Going Concern
(d) None of the above​

Answer 1

Answer:

Matching cost is the right answer

Answer 2

Fixed Assets are not shown at their realisable value in accounts because of matching cost. So option c is the correct option.

• The definition of the matching cost in accounting is related to the principle of matching. The principle states that, the expenses relative to income must be recorded for the same period of time.
• This matching principle helps business owners to avoid misstating profits for a period. For example, recognising expenses earlier results in lower net income.
• Actually, recognising an expense may later result in a relatively higher net income than actual.
• The matching cost is the revenues and any related expenses, recognised together in the same period of time.
• Hence, if there is a cause and effect relationship between revenue and certain expenses, then it should be recorded at the same time.