Course Outline
Join PRO

What is historical cost?

Author:
Harold Averkamp, CPA, MBA

Definition of Historical Cost

Historical cost is a term used instead of the term cost. Cost and historical cost usually mean the original cost at the time of a transaction.

The term historical cost distinguishes an asset’s cost from its replacement cost, current cost, or inflation-adjusted cost.

Generally, the cost principle or historical cost principle requires that an asset should be reported at its cash or cash equivalent amount at the time of the transaction and should include all costs necessary to get the asset in place and ready for use.

Example of Historical Cost

Let’s assume that a company purchased land in 1997 for $100,000. It continues to own the land and has not made any improvements. Today the land should be reported on the company’s balance sheet at its historical cost of $100,000 even though its current cost, replacement cost, inflation-adjusted cost, appraised value, and assessed value amounts range from $150,000 to $270,000.

Join PRO to Track Progress

Features

Free

PRO

Lifetime Access (One-Time Fee)
Explanations
Quizzes
Q&A
Dictionary
Bookkeeping Video Training
Financial Statements Video Training
Visual Tutorials
Quick Tests
Quick Tests with Coaching
Cheat Sheets
Flashcards
Crossword Puzzles
Word Scrambles with Coaching
Bookkeeping Study Guide
Managerial and Cost Accounting Study Guide
Certificates of Achievement
Bookkeeping Certificate of Excellence
Business Forms
Printable PDF Files
Progress Tracking
Motivational Badges and Points
Motivational Medal Rankings
Motivational Activity Streaks
Public Profile Page of Achievements

About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

Learn More About Harold

Read 3,033 Testimonials

PRO for Teams
  • Easily onboard new users and team admins
  • Monitor individual user progress and grades
  • Monitor team progress and compare users
  • View average grades and find problem areas
  • Monitor recent activity and user achievements
PRO for Teams
Take the Tour Join PRO