Cost Concept – Meaning of Cost Concept (All you need to know)

Expense Concept– By this principle, the value of a possession is to be identified on the basis of historical cost, to put it simply, acquisition cost. For this reason, All the fixed assets are recorded at Historic Expense only and market price of fixed properties is neglected.

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In accounting, the expense principle is part of the generally accepted accounting principles. Possessions should always be recorded at their cost, when the property is new and also for the life of the possession. Wikipedia

Expense Idea

Expense Principle in Comprehensive– By this idea, the value of a possession is to be identified on the basis of historical expense, to put it simply, acquisition expense. There are numerous measurement bases, accounting professionals traditionally choose this concept in the interests of objectivity. When a device is gotten by paying Rs. 5,00,000, following cost concept the value of the device is taken as Rs. 5,00,000 It is highly objective and free from all predisposition. Other measurement bases are not so unbiased. Existing cost of a possession is not easily determinable. If the property is acquired on 1.1.1995 and such model is not available in the market, it becomes challenging to identify which model is the appropriate equivalent to the existing one. Unless the device is actually offered, realisable worth will provide only a theoretical figure. Lastly, present value base is extremely subjective because to understand the worth of the asset one needs to chase after the unpredictable future.

The cost principle is one of the standard underlying guidelines in accounting. It is likewise known as the historical cost concept. The cost principle requires that possessions be taped at the money quantity (or its equivalent) at the time that a possession is gotten.

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