Author Question: Which of the following is true of the cost principle? A) It highlights the proposition that value ... (Read 56 times)

jparksx · **on:** Jul 6, 2018

Which of the following is true of the cost principle?

A) It highlights the proposition that value is not the focus of accounting and is not represented in financial statements.
B) Using this principle results in the subjectivity of value assessments.
C) Under this, costs are measured subjectively on actual basis.
D) It results in reflecting the current values of assets, liabilities, equity, revenues, and expenses shown on the financial statements.

Question 2

An owner can invest cash or other assets of value in the business.
Indicate whether the statement is true or false

robbielu01 · **Reply #1 on:** Jul 6, 2018

Answer to Question 1

A
Explanation: A) The cost principle highlights the proposition that value is not the focus of accounting and is not represented in financial statements. To avoid the subjectivity of value assessments, the cost principle is used to measure, record, and report transactions. In applying the cost principle, costs are measured objectively on a cash or cash-equivalent basis. In other words, amounts shown on financial statements reflect historical costs, not current values.

Answer to Question 2

T