Pennsylvania Auctioneer Practice Exam

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What is the Cost Principle?

  1. A. Water rights

  2. B. The actual amount paid or received is recorded

  3. C. No undo influence

  4. D. Immovable property

The correct answer is: B. The actual amount paid or received is recorded

The Cost Principle in accounting is the concept that assets should be recorded on the balance sheet at their actual cost, which is the amount that was paid to acquire them or the fair market value at the time of the exchange. This principle ensures that financial statements are based on verifiable and reliable information. Water rights, no undue influence, and immovable property are not directly related to the Cost Principle in accounting.

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