Lindsey Smith decided to start her own CPA practice as a professional corporation,Smith CPA PC.Her corporation purchased an office building for $35,000 which her real estate agent said was worth $50,000 in the current market.The corporation records the building as a $50,000 asset because Lindsey believes that is the real value of the building.Which of the following concepts or principles of accounting is being violated?

Question

Quizplus · Accepted Answer

The concept being violated is the cost principle, which states that assets should be recorded at their original cost, not their estimated fair market value. By recording the building at $50,000 instead of its actual cost of $35,000, the company is violating the cost principle.

Lindsey Smith Decided to Start Her Own CPA Practice as a Professional