Historical Cost Accounting | Eastern Kentucky University - Edubirdie

University:
Eastern Kentucky University
Course:
ACC 200 | Survey of Accounting
Academic year:

2020
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475

Pages:

1
Author:

gewoekerdodx

Historical cost accounting Historical cost accounting is an accounting method where the value of an asset is measured at its original cost. This original cost is the value at which the asset was acquired by the company. Arguments for Historical Cost Accounting: 1) Allows users of financial statement to know the original cost of asset at the time of its purchase. 2) It is more reliable than current cost accounting as it based on the values of the actual transactions. 3) Enables accountability, transparency and verification since recorded amounts are free from management biasness and manipulation due to supporting evidences such as invoices and receipts. Arguments against Historical Cost Accounting: 1) The balances presented within the financial statements are outdated. 2) Amounts are not adjusted for inflation and current interest rates 3) Historical cost accounting method do not depict the current market value of assets and liabilities.

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