Historical costs are used on the balance sheet because these costs are verifiable and objective.

Question

Quizplus · Accepted Answer

Historical costs are based on actual transactions and are therefore verifiable and objective. This makes them reliable for financial reporting purposes, especially for assets that are expected to have a long-term value. These costs provide a basis for calculating depreciation and amortization, which can be used to estimate an asset's current value. Therefore, historical costs are preferred over estimates or subjective valuations on the balance sheet.

Historical Costs Are Used on the Balance Sheet Because These