historical cost

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A method of valuing units of stock or other assets based on the original cost incurred by the organization. For example, the issue of stock using first-in, first-out cost or average cost charge the original cost against profits. Similarly, the charging of depreciation to the profit and loss account, based on the original cost of an asset, is writing off the historical cost of the asset against profits. An alternative approach is the use of current cost accounting.

Subjects: Financial Institutions and Services.

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