Historical Cost Accounting

Historical Cost Accounting is an accounting method that records the value of assets and liabilities at their original purchase price. This means the costs are based on the actual amount paid at the time of acquisition, without adjusting for changes in market value over time. It provides a consistent and verifiable basis for financial statements, making it easier to track what was initially invested. However, it may not reflect current market conditions or inflation, which can affect the asset's true value today. This method prioritizes reliability and simplicity in financial reporting.