Advantages and Disadvantages of Historical Cost Accounting
Advantages
- Historical cost accounts are straightforward to produce
- Historical cost accounts do not record gains until they are realized
- Historical cost accounts are still used in most accounting systems
Disadvantages
- Historical cost accounts give no indication of current values of the assets of a business
- Historical cost accounts do not record the opportunity costs of the use of older assets, particularly property which may be recorded at a value based on costs incurred many years ago
- Historical cost accounts do not measure the loss of value of monetary assets as a result of inflation.
Read more about this topic: Historical Cost
Famous quotes containing the words advantages, historical, cost and/or accounting:
“We work harder than ever, and I cannot see the advantages in cooperative living.”
—Lydia Arnold, U.S. commune supervisor (of the North American Phalanx, Red Bank, New Jersey, 1843- 1855)
“Some minds are as little logical or argumentative as nature; they can offer no reason or “guess,” but they exhibit the solemn and incontrovertible fact. If a historical question arises, they cause the tombs to be opened. Their silent and practical logic convinces the reason and the understanding at the same time. Of such sort is always the only pertinent question and the only satisfactory reply.”
—Henry David Thoreau (1817–1862)
“Each is under the most sacred obligation not to squander the material committed to him, not to sap his strength in folly and vice, and to see at the least that he delivers a product worthy the labor and cost which have been expended on him.”
—Anna Julia Cooper (1859–1964)
“I, who am king of the matter I treat, and who owe an accounting for it to no one, do not for all that believe myself in all I write. I often hazard sallies of my mind which I mistrust.”
—Michel de Montaigne (1533–1592)