Cost principle should be borne in mind when reading
financial statements. Under this principle all goods and services purchased are
recorded at cost and appear on the statements at cost. For example, if a
business pays Tk. 50,000 for land to be used in carrying on its operations the
purchase should be recorded at Tk. 50,000 although its salable price is Tk.
60,000. If five years later, the price of this land increase to Tk. 100,000
this makes no difference either. The land cost Tk. 50,000 and should continue
to appear on the balance sheet at Tk. 50,000 even though its estimated market
value is twice that.
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