Final answer:
The question pertains to the historical cost principle in accounting, which mandates that asset purchases be recorded at their actual purchase price. This prevents the subjective estimation of value and ensures financial statements reflect verifiable and factual data.
Step-by-step explanation:
Using an invoice, rather than the seller's opinion of the value, to document the value of equipment, is based on the historical cost principle. This accounting principle dictates that asset purchases should be recorded on the books at their actual purchase price, and not at the estimated future value or the seller's valuation. This method provides a consistent and objective way of recording the cost of assets and is a fundamental aspect of accrual accounting, which aims to record financial transactions when they occur rather than when cash is exchanged.
The historical cost principle helps to avoid the tendency to rely on initial values, prices, or quantities when estimating the actual value, price, or quantity of something. It ensures that financial statements are based on verifiable, factual information rather than subjective opinions or estimations, which is crucial for maintaining the accuracy and reliability of financial reporting.