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Essay / Research Paper Abstract
This 4 page paper discusses the statement that “despite its’ limitations, the principle of historical cost is still used in accounting”. The paper makes reference to the departure form historical costing with the use of revaluation and asset impairment regulations and the way in which historical cost may also be seen to support other conventions such as matching and prudence. The bibliography cites 5 sources.
Page Count:
4 pages (~225 words per page)
File: TS14_TEhiscost.rtf
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Unformatted sample text from the term paper:
imposes. Quiet simply, this is the concept that states all financial statement items must be based on the original cost of that item (Elliott and Elliott, 1998). However, it is
easy to see how this may present some problems in todays world. The accounts for any company in most countries will need to be assessed by an independent auditor who
will then certify that the accounts are a true representation of the company, as long as the accounts have been prepared correctly. However, where there is historic costing there are
some constraint which may lead to the accounts showing a skewed version of the reality, and as such this convention is one that is being challenged and changed. Any
set of accounts will already be out of date by the time that they are released, however with some costs the value may be more out of date than simply
the year, For example, the value of assets and abilities given on a balance sheet. This is an area where there have been many changes. For example, the valuation of
property on a balance sheet may reflect values that are inaccurate, such as under valuation indicating a much weaker asset base, or valuation that are excessive where prices may have
dropped. This is why revaluation is becoming more appropriate when seeking to give a true picture of the company to the relevant stakeholders. However, when working on an historical
cost basis there is the uniform approach and a foundation which is understood, if revaluation was allowed on an ad hoc basis this may allow for even more manipulation in
an environment where there is already distrust in the management of large companies. For this reason the regulations that may be used to give a clearer picture of the true
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