historic cost

Historical Cost

In the Generally Accepted Accounting Principles, the original cost of an asset on a balance sheet. Many assets, particularly illiquid assets, are recorded on a balance sheet according to their historical cost. A notable exception to this rule is the recording of marketable securities, which are recorded according to their market value. The historical cost usually bears little or no relationship to the market value after an asset has been held for several years.

historic cost

the original cost of purchasing an ASSET (such as an item of machinery). For accountancy purposes, the asset is entered in a firm's BALANCE SHEET at historic cost. However, allowance has to be made for the REPLACEMENT COST of the asset which, because of INFLATION, may well be considerably greater than the original price paid. Thus, DEPRECIATION provisions which are generally based on the historic cost of assets may be inadequate in a period of rapidly rising prices. See INFLATION ACCOUNTING, MARKET VALUE.

historic cost

the original cost of purchasing an ASSET (such as an item of machinery). For accountancy purposes, the asset is entered in a firm's BALANCE SHEET at historic cost. However, allowance has to be made for the REPLACEMENT COST of the asset, which, because of INFLATION, may well be considerably greater than the original price paid. Thus, DEPRECIATION provisions may be inadequate in a period of rapidly rising prices. See INFLATION ACCOUNTING.

historic cost

The cost of a structure when it was first built.Contrast with original cost,which is the price paid by the current owner.