Question

Q10 The value of a building that has been purchased by the firm for 3 crores, keeps on changing with its market value violates the principle of *
1 point
(c) Money Measurement
(a) Historical cost
(b) Matching
(d) Materiality​

Answer 1

Answer:

c ) c is the correct answer to the question

Answer 2

The principle being violated in Historical Cost.

• The principle is the estimate of the particular rate utilised correctly in the financing process. The asset value is recorded at its initial price as purchased by the firm.
• If the building was purchased by a corporation for 3 cr, the purchase price for all the years to come, even if its market value will change, it will remain the same.  
• As the direct cost of procurement is simply verifiable from the purchase records, official adoption of historical costs contributes to objectivity in proper documentation.  
• On the other hand, the market value basis becomes inaccurate since the value of an asset may shift from time to time, rendering comparisons between periods very difficult.