A business firm incurs labour cost in installing machinery. This should be treated as
Answer Details
The labor cost incurred by a business firm for installing machinery should be treated as part of the cost of the machinery. This means that it should be added to the cost of the machinery and recorded in the machinery account.
For example, if a business spends $10,000 on a new machine and $2,000 on labor costs to install the machine, the total cost of the machine would be $12,000. The $2,000 labor cost should be recorded in the machinery account as part of the total cost of the machine.
This approach is consistent with the accounting principle of cost allocation, which requires that all costs associated with an asset be recorded as part of the cost of that asset. It also ensures that the business accurately reflects the true cost of the machinery in its financial statements.