Question

A business purchases a vehicle for $35,000. Since the vehicle was advertised for $40,000 the company decided to record the asset at $40,000. This is a violation of which accounting principle?A. RelevanceB. Historical costC. MaterialityD. Recognition

Answer 1

Answer: This is a violation of "B. Historical cost" principle.

Explanation: This principle establishes that assets must be registered at the time of purchase at historical cost.

The historical cost of an asset initially arises from its purchase value. To this value are added all the expenses that were necessary to place it in a position to operate or generate income.