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

Answer 1

This is a violation of which accounting principle of Historical Cost

Step-by-step explanation:

According to Both US. GAAP and IFRS the fixed assets initially recognised on their actual cost incurred. These accounting standard require a business to record the value of Fixed assets at which they actually been purchased. This is known as historical cost principle. In this example vehicle was purchased for $35,000. This is the amount which should be recorded as a cost of vehicle.