Historical Cost Accounting
Historical cost is the cost at which an asset was actually purchased. This is the value traditionally imputed to assets in accounts. Valuation at historical cost was a natural process in the early days of accrual accounting. Historical cost represented money which had been paid out (or a liability created) which was not to be charged against profit because it represented the creation of an asset, rather than an expense. Thus, the logic of double entry suggested that assets should, initially at least, be valued at historical cost.
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