Assets are usually reported on the balance sheet at which amount?

Assets are usually reported on the balance sheet at which amount?

A. Cost

B. Current market value

C. Expected selling price

Answer: A. Cost

There was also the problem of historical cost, refer the balance sheet which majorly records assets at the cost price or amount paid for the assets incurred originally. One of the most basic and widely applied accounting conventions is the cost principle which makes it mandatory to state the amount of money that was originally paid for the asset. This principle is complied with in order to avoid exposing the assets to be reported to be overestimated or to contain figures that are too subjective or based on market fluctuations. This occurs even though other valuations currently may obtain more relevant measures based on current market value, expected incremental selling price, or cost of manufacture, or replacement cost, using cost as the base for reporting it on the balance sheet is like preserving the uniformity, reliability, and comparability of the financial reports. However, there are some exemptions which include – Depreciation adjustment or Impairment loss adjustment, which by the company’s policy is recognized; hereby showing the decrease in the value of this fixed asset with time or in certain conditions.