The National Directory of Certified Public Accountants

Ask A CPA - Bookkeeping & Write-up

What Is The Historical Cost Principle ?

The historical cost principle requires that economic resources be recorded in terms of the amounts of money exchanged at that moment in time. When a transaction occurs, the exchange price is by its nature a measure of the value of the economic resources that are exchanged. This is in contrast to the fair market value which is the estimated value of the asset if sold on a specific moment in time.

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