The excess of the cost of self-constructed assets over their cost if they had been purchased from outsiders should be recorded as an expense or loss of the period; similarly, costs of self-constructed assets which result in a cost savings should result in revenue or gain recognition.

Question

Quizplus · Accepted Answer

This statement is a correct accounting principle. When a company self-constructs an asset, they should record the actual cost of construction. If the cost of self-construction is higher than the cost of purchasing the same asset from outsiders, then the difference should be recorded as an expense or loss. If the cost of self-construction is lower than the cost of purchasing the asset, then the difference should be recognized as revenue or gain.

The Excess of the Cost of Self-Constructed Assets Over Their