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Essay / Research Paper Abstract
This 4-page paper focuses on use of the historic cost accounting method. The paper discusses the benefits of such a method, then tries to apply the method to valuation of a physician's practice. Bibliography lists 2 sources.
Page Count:
4 pages (~225 words per page)
File: D0_MThisacc.rtf
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Unformatted sample text from the term paper:
to record such a transaction so a business shows the most value of its assets without having to pay a great deal of taxes on those assets.
However, one such accounting method - historical cost - is not one that typically makes the accounting literature 100 percent of the time. Although the
president of Chartered and Certified Accountants has noted that "historic cost has served us well recent years; its prudence and importance must not be undervalued," in truth, some of the
experts have undervalued this method in favor of more fair marketing valuation practices. Yet, as well try to prove in this paper,
the historic cost method of accounting definitely has its place. Well first define historic cost accounting, then explain a situation in which this process can typically be used.
Historic cost accounting, in its most simple definition is a technique used to value an asset for the balance sheet at the price that
was paid for the acquisition at the time it was purchased (Moneyglossary.com, 2003). In other words, if a business acquires another business, if the accountant at business (a) was to
use historic cost methods, he or she would value business (b) based on the price business (a) paid for the acquisition, rather than attempting to determine the value of business
(b)s assets, goodwill, inventory, cash flow and so on. If due diligence was properly done on this acquisition, the value should be
pretty straightforward. If, on the other hand, a business acquires an asset through a "fire sale," (i.e., the acquisition has lost value for whatever reason, and the business is able
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