Which accounting concept or convention which, in times of rising prices, tends to understate asset values and overstate profits?
A)The going concern concept
B)The prudence concept
C)The realisation concept
D)The historical cost convention

Question

Quizplus · Accepted Answer

The historical cost convention records assets at their original purchase price, without adjusting for inflation. In times of rising prices, this leads to assets being reported at values lower than their current market value, and if these assets are sold, the profits can appear overstated because the cost recorded is lower than the current value.

Which Accounting Concept or Convention Which, in Times of Rising