According to the accounting cost principle, assets must be recorded at what value?

The accounting cost principle dictates that assets should be recorded on the balance sheet at their actual cost, which includes all expenditures directly attributable to bringing the asset to its intended use. This encompasses the purchase price as well as any additional costs necessary to prepare the asset for operation, such as shipping, installation, and any applicable taxes.

The rationale behind this principle is that historical cost provides a reliable and objective measure, as it reflects a verifiable transaction that can be substantiated through receipts and records. Recording assets at their actual cost ensures consistency and comparability over time, allowing for a clearer understanding of a company's financial position.

Other values, such as market value, salvage value, and book value, do not meet the requirements of thecost principle. Market value fluctuates based on supply and demand and may not reflect the original transaction price. Salvage value pertains to the estimated residual value of an asset at the end of its useful life but does not constitute the actual cost of acquiring that asset. Lastly, book value typically refers to the current value of the asset on the financial records, which may have been adjusted for depreciation; it’s not the initial cost recorded when the asset was acquired. Thus, the fundamental basis of the accounting cost principle is to utilize actual