In Accounting, What Is Historical Cost?

Historical cost accounting refers to the acquisition and consumption of any assets of an enterprise other than monetary assets such as cash and receivables, which are all priced and recorded using historical cost, which is the actual cost. Historical cost is the cash and cash equivalents paid for the purchase, manufacturing, and construction of an asset, such as the original purchase price of raw materials plus the cost of the purchase process, the actual purchase price of the goods, and the original purchase price of the fixed assets. Additional shipping and installation costs. Using historical cost as the basis for pricing and recording has the following advantages: (1) historical cost is a price determined through normal exchanges in the market, and is objective and verifiable; (2) historical cost is closer to the asset at the time of asset purchase Value; (3) Historical cost data is the easiest to obtain and is consistent with the view of operating income realization. When materials and commodities are obtained, the historical cost reflects the increase of the company's inventory materials or commodities; when materials are consumed and the commodities are sold, their decrease is also reflected at the historical cost. Specific methods include FIFO method, weighted average method, actual purchase price in batches, etc., and compare historical cost with sales income.