Explain about cost principle, Accounting Basics

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Q. Explain about cost principle?

As applied to largely assets this principle is often called the cost principle. It utter that purchased or self-constructed assets are initially recorded at historical cost. Historical cost is the amount paid or else the fair market value of the liability incurred or other resources surrendered to acquire an asset and place it in a condition and position for its intended use. For example when the cost of a plant asset (such as a machine) is recorded its cost includes the net purchase price plus any costs of testing, reconditioning, transporting and placing the asset in the location for its intended use.


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