Which cost is considered while recording assets that are purchased at different times by the company?
Answer & explanation
Correct answer: option 3
Financial statements are prepared on the basis of
facts in the form of cost data recorded in accounting books. The original
cost or historical cost is the basis of recording transactions. The figures
of various accounts such as cash in hand, cash at bank, trade
receivables, fixed assets, etc., are taken as per the figures recorded in
the accounting books. The assets purchased at different times and at
different prices are put together and shown at costs. As these are not
based on market prices, the financial statements do not show current
financial condition of the concern.