Jump to content
  • Sign Up

What is historical cost?


Rick Murray
 Share

Recommended Posts

Historical cost is the original cost of the item on the date of purchase. It is used in accounting as a measure of value for recording price of assets on the balance sheet. 

An example of this may be seen in real estate purchases. Let us suppose that a company had purchased a building in 1932 in downtown New York at $10,000. In 2018, that building cost $10 billion. But the asset recorded on the balance sheet is $10,000.

Other than the purchase price, the historical price also includes any additional costs incurred to make the purchase full operating asset.

For example, the company purchased equipment for a restaurant at $25,000. Also, delivery and installation of equipment cost $2,500. Historical cost of restaurant equipment is $25,000 + $2,500 = $27,500. That value will be recorded on the balance sheet.

Link to comment
Share on other sites

 Share

Loyverse Point of Sale

 

 

 

 

×
×
  • Create New...