How Do Historical Cost Accounting Cause Reduction In Potential Capital?
As we know that profit is distributed among the partners. But if the profit is based on historical cost so how it may result in reduction of capital in real time? I m totally out of mind and cant get the exact point.
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asked 2 years ago
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Historical cost accounting refers to the concept of historical cost which is the original monetary value of an item. The concept is very simple as the historic cost doesn't reflect the current market valuation of an item and its accounting adds factors such as depreciation etc. Which causes reduction in profits. For reference and more details see the link below:
en.wikipedia.org
en.wikipedia.org
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