Which principle states that an asset must be recorded at the price paid to acquire it? MCQ with Answer and Explanation

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Which principle states that an asset must be recorded at the price paid to acquire it?

A. Matching Principle

B. Realization Principle

C. Historical Cost Principle

D. Conservatism Principle

Answer: Option C

Solution (By JKSSB Mock Tests)

The historical cost principle requires that assets be recorded at their original purchase price, irrespective of changes in market value over time.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Question #1

What is an 'amended cash book' in the context of BRS?

A. A cash book updated for bank errors

B. A cash book updated with missing transactions and rectifications before preparing BRS

C. A cash book prepared by the bank

D. A cash book used only for petty expenses

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Correct Answer: Option B

Explanation:
An amended cash book adjusts for items like direct deposits, bank charges, and clerical errors in the cash book before reconciling timing differences.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

Question #2

In cost accounting, 'Variable Cost' per unit:

A. Decreases with production

B. Remains constant

C. Fluctuates randomly

D. Increases with production

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Correct Answer: Option B

Explanation:
Variable cost per unit remains constant; total variable cost changes with output.

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Question #3

The 'Return on Equity' (ROE) is computed as:

A. Gross profit / Equity

B. Net profit / Total assets

C. EBIT / Equity

D. Net profit / Shareholders' equity

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Correct Answer: Option D

Explanation:
ROE measures return to equity shareholders.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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