The accounting concept or principle that is perhaps the greatest single culprit in distorting the results of financial statement analysis is the:
A) Matching principle.
B) Conservatism concept.
C) Historical cost principle.
D) Time value of money concept.

Question

Quizplus · Accepted Answer

The pervasive use of the historical cost concept is probably the greatest single cause of distorted financial statement analysis results. The historical cost of an asset does not represent its current value. The asset purchased years ago for $10,000 is not comparable in value to the asset purchased in in the current year for $10,000 because of changes in the value of the dollar. Using historical cost produces financial statements that report dollars with differing purchasing power in the same statement.

The Accounting Concept or Principle That Is Perhaps the Greatest