How does the use of the historical cost concept understate assets and overstate profit in times of rising prices?

(i) The assets may be reported in terms of pound sterling of a lower value

(ii) Liabilities may be reported in terms of pound sterling of a higher value

(iii) Depreciation/cost of sales in the Statement of income fail to reflect current value

(iv) Non-current assets may be reported in terms of currency with a higher value

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