Which accounting concept states that items should be recorded at their original cost?

The historical cost principle states that assets are generally recorded at their original acquisition or production cost. That amount can include the purchase price and directly attributable transaction costs, rather than the asset’s later market value.

This approach gives accounting records an evidence-based starting point: the original transaction usually has a documented price that can be independently checked. For example, equipment bought for $100,000 is initially recorded at that cost even if its market value later rises to $120,000. Depreciation, impairment, or other permitted adjustments may subsequently change its carrying amount.

Historical cost is not the same as fair value. Fair-value accounting updates certain assets and liabilities using current market prices or estimates. Modern standards use a mixture of measurement bases, and some financial instruments must be remeasured. Another common mix-up is conservatism: conservatism concerns cautious recognition of gains and losses, whereas historical cost concerns the measurement basis used at initial recognition.