Historical Cost

Historical Cost An accounting term, meaning the original or acquisition cost of an asset. In historical cost accounting all values, whether of assets or liabilities, income or expenditure, are stated at their original value. This means that these sums are of historical relevance and do not reflect the current cost of production. In times of inflation this may produce quite a wrong picture of the profitability of a company. Also depreciation provisions made on historical costs may prove quite inadequate for replacements or renewals.

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