ABC Ltd purchased a machine for ₹20,000. After a period of 5 years, the accumulated depreciation on the machine is ₹14,000. However, the machine has a good resale value in the market, the current market value of the machine is ₹6,000. At what value should the machine be recorded in the books of accounts and because of which accounting concept?
₹16,000; Historical Cost Concept
According to the Historical Cost Concept, assets are recorded at their original cost minus accumulated depreciation. Hence, the machine will be recorded at ₹16,000 (₹20,000 - ₹14,000) in the books of accounts, as it is based on its historical cost less accumulated depreciation.
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