Question

Assets are recorded and reported at the cost to acquire them. What term describes this accounting concept?

1) Historical cost
2) Market value
3) Replacement cost
4) Fair value

Answer 1

The term that describes the accounting concept where assets are recorded at the cost to acquire them is 'historical cost'.

Step-by-step explanation:

The accounting concept that describes assets being recorded and reported at the cost to acquire them is known as historical cost.

This method involves recording the acquisition cost of an asset on the balance sheet, which may not necessarily reflect the current market value.

The historical cost is used as it provides a reliable measurement of the actual money spent on acquiring the asset and is less susceptible to fluctuations and subjective judgments that may occur with methods like fair value accounting.