Star trading Co.Ltd. buys a piece of land for Rs. 50,00,000. After 2 years the value of land came to Rs. 70,00,000. But the accountant

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Asked: 2023-05-15T17:20:32+05:30 In: Commerce
Star trading Co.Ltd. buys a piece of land for Rs. 50,00,000. After 2 years the value of land came to Rs. 70,00,000. But the accountant

Hi, I have a question and I hope anyone could answer it:

Star trading Co.Ltd. buys a piece of land for Rs. 50,00,000. After 2 years the value of land came to Rs. 70,00,000. But the accountant does not consider the increase in the value of Rs. 20,00,000 in the books of accounts and the land remains at Rs. 50,00,000 in the books. Do you agree with the accountant? If so, on what ground?.

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  2. Gandalf

    Answer:
    The accountant’s viewpoint is correct. This is based on the principle of ‘Historical cost’. According to this principle, assets are to be recorded at their cost price and this cost is the basis for all subsequent accounting for those assets.

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