Question 3 A company buys new computer equipment for 10 000 pounds. At the same time it...

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Accounting

Question 3
A company buys new computer equipmentfor 10 000 pounds. At the same time it buys 3 pens for 40 penceeach. Define the following accounting conventions and explain howthey would affect the recording of these transactions?
Historic cost convention
Materiality convention
There are 10 marks available forthis question: 2 for each definition and 3 for eachexplanation

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3.5 Ratings (498 Votes)

a Historical cost Convention Historical cost refers to the cost at the time of aquisition Since accounting is basically the recording of past happenings accountants use the acquisition price as the most objective measurement in as much as the evidence of a transaction supports it It is fundamental concept of accounting which is based on a historical record of the transactions ie an asset will ordinarily be recorded at its cost and this cost will be the basis for all subsequent accounting for the assets if a plot of land is purchased say for rs 10000 pounds I See Answer

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