Not adjusting the amounts reported in the financial statements for inflation is an example of which basic principle of accounting?
A) Economic entity.
B) Going concern.
C) Historical cost.
D) Full disclosure.

Question

Quizplus · Accepted Answer

The principle of historical cost states that assets should be reported on the balance sheet at their original cost (i.e. what was paid for them), regardless of changes in their fair market value due to inflation or other factors. Therefore, not adjusting for inflation is consistent with the historical cost principle.

Not Adjusting the Amounts Reported in the Financial Statements for Inflation