Commercial Applications
A company values its machinery at its original purchase cost minus accumulated depreciation. This valuation method is based on which of the following assumptions?
- Money Measurement Concept
- Going Concern Concept
- Realisation Principle
- Dual Aspect Principle
Answer
Going Concern Concept
Reason — Under the Going Concern Concept, fixed assets are recorded at their original cost less depreciation, since the business is assumed to continue for an indefinite period and the assets are not meant to be sold in the near future. Hence the market value of fixed assets is not recorded.
Related Questions
A company decides to change its method of depreciation from the straight-line method to the reducing balance method without disclosing this change in the financial statements. Which principle has been violated?
- Matching Principle
- Consistency Principle
- Dual Aspect Principle
- Going Concern Concept
It is the second stage and provides conclusions.
- Accounting
- Book keeping
- Book maintaining
- Book recording
The Money Measurement Concept allows the recording of non-monetary transactions, such as the reputation of a company, as long as they are significant to the business.
- True
- False
Accounting cycle ends with the ……………
- Recording of transactions in journal
- Preparing income statement
- Posting entries in ledger
- Preparation of balance sheet