Ten years after a company purchases a plot of land, it is reported on the balance sheet at its cost from the year it was purchased instead of its current selling price. This accounting practice is justified by the:
A)financial period assumption.
B)going concern assumption.
C)fiscal period assumption.
D)original cost base.

Question

Quizplus · Accepted Answer

The accounting practice of reporting the cost of the plot of land on the balance sheet is justified by the original cost base principle, which states that assets should be recorded on the balance sheet at their original cost. This practice provides a more accurate representation of the company's financial position at the time of acquisition and helps to avoid fluctuations in the value of the asset over time. The other answer choices do not provide a rationale for this accounting treatment.

Ten Years After a Company Purchases a Plot of Land