Practicing Success
How are various accounts such as cash in hand and fixed assets treated in financial statements? |
Based on market prices Recorded in accounting books Shown at their current value Ignored in financial statements |
Recorded in accounting books |
Financial statements are prepared based on factual cost data recorded in accounting books. Transactions are recorded using the original or historical cost as the basis. The figures for various accounts, such as cash in hand, cash at bank, trade receivables, and fixed assets, are taken from the accounting books. These accounts represent assets purchased at different times and at different prices, which are then aggregated and shown at their respective costs. However, since financial statements do not consider market prices, they may not accurately reflect the current financial condition of the concern. |