Question

Q1: A hotel shows office supplies such as stationery on its balance sheet as a
$500 asset, even though to any other hotel these supplies might have a value
only as scrap paper. Which accounting principle or concept justifies this?

Answer 1

According to the Going concern concept business is an ongoing organization which has indefinite working life.

As per this approach accountant believes that the life of any business is not restricted within a time limit , rather it is going on indefinitely.

So, unused stationery like stock of paper, pen, rubber stamp, ink can be stored safe and used for the next year.

Now, if it has been wasted , then for the next year use further it has to be purchased which will incurred expenditure . But if it has been stored safe then such expenditures can be eliminated.

As we know assets are the elements which makes future benefits which can be measured in terms of money.

Here, in this case such stock of stationery benefits the business to reduce it's future expenditure by $ 500, thus it can be considered as an asset.