Question 11.4: You own a motor car which you bought for $10,000 cash at an ...

Up to now, when we have been preparing historical accounts, the answer is straightforward. The cost is what we paid for the car—$10,000. However, by retaining the car, you are sacrificing the opportunity to sell the car to receive cash of $12,000. Thus, the real sacrifice, or cost, incurred by keeping the car for your own use is $12,000.