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The cost principle is the basis for the preparation of financial statements, as it is?




Objective.

Historical costs are objective numbers. For example, land is purchased for $ 200,000 in books and remains on the books at historical cost and purpose. Although the land is estimated at $ 300,000, the number on the books is not changed. That valuation is subjective again.

If subjective assessments is allowed


You can ensure that all companies would revalue their assets all the time "to present the best image." The problem is that the practice would make the central point of the accounting sense. One can forget about the accuracy, consistency and comparability of subjective assessments if they are allowed.

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