Free college essay advantages and disadvantages of historical cost accounting, alternatives to historical cost accounting advantages and disadvantages of historical cost accounting, alternatives to historical cost accounting 21 introduction accounting concepts and conventions as used. Paper on:- “the use of the historical cost convention and the accrual concept for stewardship and for decision making” topic 1: the historical cost convention introduction the historical cost convention is unarguably one of the most debated topics in the theoretical base of accounting.
One accounting technique used is the historical cost convention which requires the minutess to be recorded at the original monetary value, ie , the monetary value paid, in the balance sheet the sum and the day of the month of the dealing are both recorded under historical cost convention. The historical cost accounting is the situation in which accountants record revenue, expenditure and asset acquisition and disposal at historical cost: that is, the actual amounts of money, or money's worth, received or paid to complete the transaction. Historical cost accounting (hca) might be the most suitable convention for stewardship purposes but may not be the most suitable for decision usefulness this view has been apparent in the uk, with attempts to introduce supplementary accounts based on the current purchasing power (cpp) convention and the current cost convention (cca.
We will write a custom essay sample on advantages and disadvantages of historical cost accounting we will write a custom essay sample on advantages and disadvantages of historical cost accounting specifically for you related essays the historical cost accounting convention the historical cost convention the principle of historical.
Historical cost accounting is a traditional valuation method as it reflects only on the past cost of the asset, however in the contemporary business environment companies must remain flexible and transparent. Under historical cost accounting, profit is the difference between sales proceeds and the original cost of the item sold the purpose of the calculation is to determine the amount available for distribution after the money value of the owners’ original investment has been maintained intact.
Historical costs, advantages and disadvantages of historical cost accounting, alternatives to historical cost accounting historical costs historical cost is a generally accepted accounting principle requiring all financial statement items be based upon original cost. Accounting concepts and conventions as used in accountancy are the rules and guidelines by which the accountant lives the historical cost accounting convention is an accounting technique that values an asset for balance sheet purposes at the price paid for the asset at the time of its acquisition. Historical cost accounting has been a controversial method that experienced many criticisms over a period of time, especially since it considers the acquisition cost of an asset and does not recognize the current market value.
Essay about the historical cost convention used in historical cost accounting the historical cost convention used in historical cost accounting , records transaction at the monetary value at the date of transaction (ie their historical cost .