Historical Cost Accounting Case Study

1585 Words4 Pages

2.0 Content
2.1 Define Three (3) Accounting Concepts

2.1.1 Define Historical Cost
Historical cost is the initial or original amount/cost charged for an asset, as recorded in an entity's financial statements. (Bragg, 2010)

2.1.2 Define Matching Concept
Matching concept is an accounting concept or accounting practices that match the amount of revenues with the amount of any related expenses incurred together during the same accounting period. (Bragg, 2017)

2.1.3 Define Prudence Concept
Prudence concept is practised by recognizing the confirmed revenue transaction of an asset and the possible expenses and liabilities incurred. (Bragg, 2013)

2.2 Explain the Three Accounting Concepts are applied in practice
2.2.1 How Historical Cost concept applied in practice? Historical cost is all of the transactions or value of the item/asset are recorded in their original cost/value incurred in the past/time and the cost/value incurred when the transaction took place. By using the historical cost accounting concept, the firm calculates a more accurate and reliable value of the particular item/asset (Accounting-Simplified.com, 2017)
Example & Explanation:
The company land and building was bought for RM 1,000 million in the year 2000 and its expected market …show more content…

(AccountingTools, 2017). Until now, Nestle Malaysia has used the straight line method to measure and record the depreciation of plants and machineries. (Appendix XX) The depreciation of plants and equipment in 2015 and 2016 are recorded and measured with the straight line method. (Appendix XX) Furthermore, the costs of all assets are recorded in historical value. All these has proven that Nestle Malaysia practices the consistency concept in their financial

Open Document