Question

increase/decrease in market value of asset is not accounted is ________ concept ​

Answer 1

ANSWER :

★ Increase/decrease in market value of asset is not accounted is Cost Concept.

• ➛ According to Cost Concept, an asset is recorded in the books of account at the price paid to acquire it and cost is the basis for all subsequent accounting for the asset.

• ➛ Cost Concept does not mean that the acid will always be shown at cost but it means that cost becomes the basis of all future accounting for the asset.

• ➛ The market value of an asset may change with the passage of time, but for accounting purposes it continues to be shown at it book value i.e., the cost at which it was acquired as per as per Cost Concept.

• ➛ Cost Concept has the advantage of bringing objectivity in accounting as it states that all accounting records shall be made at cost as and when the transaction takes place.

• ➛ Cost Concept makes the information of the financial statement highly objective because does source of information can be verified easily.

• ➛ Information based on Cost Concept is relevant and useful because the fixed assets are not for resale but for use in the business for a long time under going concern concept for which the market prices of the assets are irrelevant.