Average Accounting Return is a measure of accounting profit relative to:
Correct answer: D. Book value
- A. Market value
- B. Intrinsic value
- C. Cost
- D. Book value
Explanation
Average Accounting Return compares average accounting profit with the asset’s average book value, not its market or intrinsic value. It is therefore based on accounting values recorded in the books.
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About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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