In accounting, a historical cost is the original cost or monetary value of an item. Historical cost is generally based on the stable measuring unit assumption. In some circumstances, assets and liabilities are shown at their historical cost, and there is no change in value since the date of acquisition. Therefore, the balance sheet value of an item may differ from the "true" value.
Historical cost is criticized for its inaccuracy as it is deviated from the true value although it remains in use in most accounting systems. Various corrections are done to historical cost. But the trend in most accounting standards is to move towards more accurate or fair market value. Historical cost is in use, particularly for assets of little importance.
Historical cost does not tell about current market valuation because depreciation is not included in this historical cost. Alternative measures taken are to update value of an asset to the market price.
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