Historical cost and current cost accounting

Historical cost accounting 同 Current cost accounting 系乜來咖?點分?

Historical 一般用系邊點公司?點解既?點用咖?

甘current cost accounting la ??

1 Answer

  • ?
    Lv 6
    1 decade ago
    Favorite Answer

    In accounting, the historical cost principle dictates that most assets and liabilities should be recorded at their historical cost.

    valuing assets at current replacement cost: a method of accounting that assesses the value of assets as the cost of replacing them rather than as their original cost

    Nowadays, almost all the accounting standards require the cost to be recognised in historic cost. For example, a tract of land which was purchased 50 years ago for $10,000 may be worth $1 million today but it will be recorded on the balance sheet at its historical cost: $10,000. Historical cost principle is used because of its reliability and freedom of bias when compared to fair market value principle. However, historical cost does not always provide relevant information. Thus there is an increasing pressure to use fair market value. Today most securities and debts are recorded at market value. In contrast to US GAAP, under UK GAAP firms may revalue assets based on appraised market values. This can result in the recognition of unrealized gains as income.

Still have questions? Get your answers by asking now.