What is the cost of cost?

Cost principle is an accounting concept that states that goods and services should be recorded at their original or historical costs. This concept is mainly used in recording short and long -term assets and liabilities or capital investments. This concept accepts a conservative approach when recording items into the company's accounting book. Detectives of the principle of historical costs believe that this concept does not represent the most up -to -date or accurate value for balance sheet items. Although many accounting educators and theorists have criticized the principle of historical costs, it is still the most widely used method for recording items in accounting books. Although the value of these items can often change in the open market, they remain on account books for historical costs up to sale. After the sale, the company will report a profit or loss of these items depending on the selling price.

byThe cost of the cost is recorded at historical costs and depreciated because the age of items or the company uses the value of the asset. This use is recorded as depreciation on accounting books; The original long -term assets are counted against the overall depreciation to determine the value of the asset rescue. The cost principle uses the value of rescue assets as the future market value of the item. When the company sells long -term assets, any cash difference above or below the value of rescue is considered to be a profit or loss in the company's books. The consideration liabilities are recorded in a similar way by means of the cost principle.

Short -term obligations such as payable accounts or credit lines are recorded at hi.storical costs, as this represents the value of goods or services received by companies. Long -term investments or capital securities were traditionally recorded at historical costs according to the cost of the cost. Changes in accounting rules, mostly from PRIncipes on the market have changed the way the companies recorded certain financial investment tools. Mark-to-Market accounting requires companies to re-evaluate the historical cost of financial securities for current market values.

re -evaluation of financial securities occurs at specific intervals during the accounting cycle; Companies must write off or increase the value of these financial instruments. Mark-to-Market accounting creates a significant change in principle of accounting costs. Companies are now forced to recognize profits and losses before the sale of financial securities, a change in the value or wealth of the company.