Cost Principle GAAP
Here we discuss about Cost Principle that is one of the Generally Accepted Accounting Principles (GAAP). The Cost Principle states that assets should be recorded or valued at cost initially. It does so to show historical cost of the assets at balance sheet of the business when the asset was purchased for the first time of the company history. However, t his pri nciple restricts t h e compa ny to s how o nly origi nal cost . So, for a compa ny it does not mean that a compa ny always follows t his pri nciple of GAAP a nd s hows assets at cost o nly . The Entrepreneur may record assets at other than historical cost to show on balance sheet. According To Cost Principle, the cost value will become the basis for the valuation of the assets. For Example, if the market value of the asset is increased or decreased, then the assets can be revalued at the market value. For Example if a busine...