Which of the following is true about the cost principle?
A) It limits the economic data recorded in an accounting system to data related to the activities of that company.
B) It initially records assets in the accounting records at their purchase price.
C) It assumes that a company will continue in business indefinitely.
D) It reports the revenues earned by a company for a period with the expenses incurred in generating the revenues.

Question

Quizplus · Accepted Answer

The cost principle requires that assets be initially recorded at their historical cost or purchase price. This means that any subsequent increase in value of the asset is not reflected in the financial statements until it is sold or otherwise disposed of.

Which of the Following Is True About the Cost Principle