Podcast
Questions and Answers
What is the Cost Principle in accounting?
What is the Cost Principle in accounting?
- It states that assets and liabilities should be recorded at their estimated future value
- It states that assets and liabilities should be recorded at the highest price they could be sold for
- It states that assets and liabilities should be recorded at their original cost at the time of acquisition (correct)
- It states that assets and liabilities should be recorded at their current market value
When should assets and liabilities be recorded according to the Cost Principle?
When should assets and liabilities be recorded according to the Cost Principle?
- At their expected future value
- At their original or historical cost at the time of acquisition (correct)
- At their most recent value
- At their depreciated cost over time
According to the Cost Principle, how should assets and liabilities be valued on financial statements?
According to the Cost Principle, how should assets and liabilities be valued on financial statements?
- At their original or historical cost at the time of acquisition (correct)
- At their current market value
- At their estimated future value
- At their maximum potential selling price
What does the Cost Principle state about recording assets and liabilities?
What does the Cost Principle state about recording assets and liabilities?
Which accounting concept states that assets and liabilities should be recorded at their original cost?
Which accounting concept states that assets and liabilities should be recorded at their original cost?
What is the main guideline of the Cost Principle in accounting?
What is the main guideline of the Cost Principle in accounting?
What principle requires assets to be recorded on financial statements at the amount paid to acquire them?
What principle requires assets to be recorded on financial statements at the amount paid to acquire them?
According to the Cost Principle, in what way should liabilities be recognized on financial statements?
According to the Cost Principle, in what way should liabilities be recognized on financial statements?
What does the historical cost principle dictate when recording assets in accounting records?
What does the historical cost principle dictate when recording assets in accounting records?
How does the historical cost principle contribute to financial reporting?
How does the historical cost principle contribute to financial reporting?
What is the main emphasis of the historical cost principle?
What is the main emphasis of the historical cost principle?
Why is it important to record assets at their original purchase cost according to the historical cost principle?
Why is it important to record assets at their original purchase cost according to the historical cost principle?
What is the fundamental concept underlying the historical cost principle?
What is the fundamental concept underlying the historical cost principle?
Which approach does the historical cost principle discourage in valuing assets?
Which approach does the historical cost principle discourage in valuing assets?
What is one of the criticisms of the historical cost principle?
What is one of the criticisms of the historical cost principle?
What is a limitation of the historical cost principle in accounting?
What is a limitation of the historical cost principle in accounting?
Why is the original purchase cost considered a verifiable and concrete amount?
Why is the original purchase cost considered a verifiable and concrete amount?
What is one of the advantages of using the historical cost principle for recording tangible assets?
What is one of the advantages of using the historical cost principle for recording tangible assets?
How are intangible assets such as patents, trademarks, and copyrights recorded under the historical cost principle?
How are intangible assets such as patents, trademarks, and copyrights recorded under the historical cost principle?
Under the historical cost principle, how are investments in stocks, bonds, and other securities initially recorded?
Under the historical cost principle, how are investments in stocks, bonds, and other securities initially recorded?
In what way does the historical cost principle simplify the accounting process for valuing and recording assets?
In what way does the historical cost principle simplify the accounting process for valuing and recording assets?
What does using the historical cost principle for tangible assets reduce?
What does using the historical cost principle for tangible assets reduce?
When does subsequent changes in market value impact the value of investments on the balance sheet according to the historical cost principle?
When does subsequent changes in market value impact the value of investments on the balance sheet according to the historical cost principle?
What is one criticism against using historical cost during periods of inflation or deflation?
What is one criticism against using historical cost during periods of inflation or deflation?
How does historical cost provide a stable and reliable measure of asset values during times of economic volatility?
How does historical cost provide a stable and reliable measure of asset values during times of economic volatility?
