The historical cost principle requires that
A) assets be valued at their cost when they were acquired.
B) raw materials costs be recognized at their average price over the last three years.
C) assets be be valued at their average cost over the last three years.
D) historical costs be used on both the income statement and the balance sheet.

Question

Quizplus · Accepted Answer

The historical cost principle requires that assets be valued at their cost when they were acquired, not their current market value or any other measure. This is because the historical cost provides a reliable measure of the "real" or "objective" value of an asset, based on an actual transaction that has taken place in the past. This principle is fundamental to the preparation of financial statements and is generally accepted by accountants, auditors, and regulators around the world.

The Historical Cost Principle Requires That