Land and building are shown at 10 lakh in balance sheet of business owned by Mr X.However as per the certificate of govt approved valuer the realisible value of land n building is 200 lakh.Mr X wants to show the land n building at this value in the books.Can he do so...explain the principle involved

Dear Student,

The principle involved in the given situation is "Historical Cost Principle" which states that an asset must be recorded at the actual cost price at which it was originally purchased. Assets should not be recorded at their market price , as the market price keeps on fluctuating & thus impacts comparability & consistency.

Therefore, Mr. X should not re-value the Land & Building at Rs 200 Lakh. It should continue to show it at its original value less accumulated depreciation.

Regards,


 

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cost concept principal involved.only the purchase value of the land and building showed be shown in the balance sheet, however the price incresing shoed be not be shown in balance sheet
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historical cost principal is involved
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