Mr jahanzaib has set up a new sole proprietorship business

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Mr. Jahanzaib has set up a new sole proprietorship business one year ago. At the end of the financial year, he has to prepare financial statements of the business. In the last month of the closing year, he had an offer to sell the freehold land for Rs. 600,000/- which was previously purchased for Rs. 400,000/-. Mr. Jahanzaib had reported the land in his balance sheet at Rs. 600,000/- considering the offered value.

Required: Do you think that Mr. Jahanzaib has rightly reported the land's value in the Balance Sheet? Justify your answer in the light of accounting principle(s). You are only required to mention the name of applied principle(s). Details are not required."

Reference no: EM13605124

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