Which term denotes the value of an item as recorded on financial statements?

Which term denotes the value of an item as recorded on financial statements?

• A. Book Costs
• B. Money Supply
• C. Inflation
• D. Opportunity Costs

Answer: (A)

The value of an item as shown on financial statements is its book costs. In accounting, assets are recorded at their purchase price—the cost principle—and this amount sits in the books as the basis for the asset. Over time, that recorded amount may be adjusted by depreciation or impairment, resulting in the carrying amount or book value still reflected in the financial statements. This is different from market value (which could be higher or lower), inflation (the overall rise in prices), or opportunity costs (the value of the best alternative forgone). So the term that best denotes the value recorded in the books is book costs.

The value of an item as shown on financial statements is its book costs. In accounting, assets are recorded at their purchase price—the cost principle—and this amount sits in the books as the basis for the asset. Over time, that recorded amount may be adjusted by depreciation or impairment, resulting in the carrying amount or book value still reflected in the financial statements. This is different from market value (which could be higher or lower), inflation (the overall rise in prices), or opportunity costs (the value of the best alternative forgone). So the term that best denotes the value recorded in the books is book costs.