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A concern proposes to discontinue its business from December2023 and decides to dispose off all its plants within a period of 3months. The Balance Sheet as on 31st December, 2023 should continue to indicate the plants at its historical costs as the assets will be disposed off after the Balance Sheet date. True or False?
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A concern proposes to discontinue its business from December2023 and d...
Historical Cost Principle
The historical cost principle states that assets should be recorded at their original purchase price. This principle is foundational in accounting, providing consistency and reliability in financial statements.
Disposal of Assets
When a business decides to discontinue operations and dispose of its assets, the treatment of these assets in the Balance Sheet can change, particularly if the disposal is imminent.
Impact on Balance Sheet
- Timing of Disposal: Since the plants will be disposed of within three months after the Balance Sheet date, this is considered a significant event.
- Asset Valuation: Typically, assets should be reported at the lower of historical cost or fair value less costs to sell if they are classified as held for sale.
Accounting Standards
- IFRS and GAAP: Both International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) require that if a company plans to sell an asset, it should be classified as "held for sale."
- Revaluation: Upon classification, the asset may not always be shown at historical cost. If the fair value is lower than the carrying amount, impairment may need to be recognized.
Conclusion
In conclusion, it is False to assert that the Balance Sheet as of December 31, 2023, should continue to reflect the plants at historical costs. Given the intention to dispose of the assets shortly after, they should be reported at the lower of historical cost or fair value, ensuring accurate representation of the company's financial position.
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A concern proposes to discontinue its business from December2023 and decides to dispose off all its plants within a period of 3months. The Balance Sheet as on 31st December, 2023 should continue to indicate the plants at its historical costs as the assets will be disposed off after the Balance Sheet date. True or False?
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A concern proposes to discontinue its business from December2023 and decides to dispose off all its plants within a period of 3months. The Balance Sheet as on 31st December, 2023 should continue to indicate the plants at its historical costs as the assets will be disposed off after the Balance Sheet date. True or False? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about A concern proposes to discontinue its business from December2023 and decides to dispose off all its plants within a period of 3months. The Balance Sheet as on 31st December, 2023 should continue to indicate the plants at its historical costs as the assets will be disposed off after the Balance Sheet date. True or False? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A concern proposes to discontinue its business from December2023 and decides to dispose off all its plants within a period of 3months. The Balance Sheet as on 31st December, 2023 should continue to indicate the plants at its historical costs as the assets will be disposed off after the Balance Sheet date. True or False?.
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