11-22-2010, 01:59 PM
Suppose you are working as an accountant and the president of your firm Mr. Ali has a little back ground of accounting. This morning, he approached you and said
âLast year we purchased a piece of land for Rs. 200,000. During this, the inflation has driven prices up by 12 %, and an expert has also just told me that we can sell this land for Rs. 300,000 whereas our balance sheet still shows the land at Rs. 200,000. It should be valued at Rs. 300,000 or at least at Rs. 224,000 (after the effect of 12% inflation)â.
Identify accounting principle(s) (GAAP) applicable to this situation which negates Mr. Aliâs Claim. â
âLast year we purchased a piece of land for Rs. 200,000. During this, the inflation has driven prices up by 12 %, and an expert has also just told me that we can sell this land for Rs. 300,000 whereas our balance sheet still shows the land at Rs. 200,000. It should be valued at Rs. 300,000 or at least at Rs. 224,000 (after the effect of 12% inflation)â.
Identify accounting principle(s) (GAAP) applicable to this situation which negates Mr. Aliâs Claim. â