BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -The historical cost principle states that a company or business must account for and record all assets at the original cost or purchase price on their balance sheet.

Detailed explanation-2: -According to the cost principle, transactions should be listed on financial records at historical cost – i.e. the original cash value at the time the asset was purchased – rather than the current market value. The cost principle is also known as the historical cost principle and the historical cost concept.

Detailed explanation-3: -Historical Cost Principle – requires companies to record the purchase of goods, services, or capital assets at the price they paid for them.

Detailed explanation-4: -An example of historical cost could be a company that purchased a building in 1955 for a price of $20, 000. In its accounting record, the asset value is $20, 000. In the real market, however, this asset is valued at $875, 000. Under the historical cost principle, the asset would remain in the company’s books at $20, 000.

Detailed explanation-5: -Historical cost is what your company paid for an asset when you originally bought it. That cost is verifiable by a receipt or other official record of the initial transaction. It is a static snapshot of asset value at the time of purchase and provides no measure of how value may have changed over time.