1. Historical cost

2. Definition  Assets should be shown on the balance sheet at the cost of purchase

3. Definition  Assets should be shown on the balance sheet at the cost of purchase 4 Assets are recorded at the amount of cash or cash equivalents paid

4. Definition  Assets should be shown on the balance sheet at the cost of purchase 4 Assets are recorded at the amount of cash or cash equivalents paid 4 The value of an asset will not be affected by subsequent changes

5. Advantages of the cost concept 4 (1) 4 Transactions are recorded objectively at amounts which can be proved ; there will not usually be any argument about the cost of assets purchased from outside the business

6. Advantages of the cost concept 4 (2)  The accounting income is just the difference between realized revenue and corresponding historical costs. This method of measurement is easy to use and generally accepted and understood by various users.

7. Advantages of the cost concept 4 (3) 4 In accounting, the concept of historical cost is consistent with the going concern, consistency and prudence concepts.

8. Disadvantages of the cost concept 4 (1)  The historical cost of assets disclosed in the balance sheet does not present the current value of resources employed in the enterprise

9. Disadvantages of the cost concept 4 (2)  Historical cost is less relevant when compared with current value.

10. Disadvantages of the cost concept 4 (3) 4 The cost concept accounting may produce impressions of the growth and profitability of a business. As the value of money changes due to inflation, there is a continual erosion of purchasing power.

11. The cars are identical,but on the cost concept, are recorded at different costs simply by accident of being bought at different times 4 1st year ----$1000 4 2nd year----$1200 4 3rd year----$1500

12. Disadvantages of the cost concept 4 (4)  Historical cost accounting fails to reveal whether the company is earning sufficient funds to enable it to maintain its capital in real terms.

13. Disadvantages of the cost concept 4 (5) 4 In periods of rising prices, the trading profit is an integration of holding gains and operating gains.