A/cs final........?

CA Final 726 views 3 replies

ekta

student

623 Points Posted on 28 March 2012

1. If i purchase land for rs 50,00,000 today.....and after 5 years it gets appreciated to 1crore...then why dont we show 1cr rs figure in balance sheet?why do we always value our assets at book value and not at market value?

2.parveen sharma give two methods in holding company accounts to solve the question .....long and short method,....which method should we follow?in every situation if i foolow short method will it be correct?

Replies (3)

CA Karan Lodhi

CA and B.com(hons.)

879 Points Posted on 28 March 2012

Hi Ekta...We always value our Assets at cost price or Historical cost and show them at dis value in our Balance sheet..Assets are revalued on admission of partners,death or retirement of partners or in case of dissolution or Restructure of business...Its the Accounting principle

Raghav Toshniwal

student

450 Points Posted on 28 March 2012

agreed with karan's reply,

each of the company's assets was recorded at its original cost, and even if the fair market value of an asset increases, it will not increase the recorded amount of that asset on the balance sheet. This is the result of another basic accounting principle known as the cost principle.

Although we generally do not increase the value of an asset, we might decrease its value as a result of a concept known as conservatism.

These are the accounting principles that we have to follow while preparing the financial statements.

Regards,

RAGHAV