Historical cost vs current cost accounting method

Abstract

Historical cost accounting indicates that assets, liabilities, and equity are recorded at the value of the transactions issued to acquire them. In contrast, current cost accounting (CCA), also known as present value accounting, reflects the cost required to replace an asset in the current period. This replacement cost encompasses the expenses incurred in producing a product using the current methods, materials, and specifications. Data collection was performed using qualitative research literature review. This study will illustrate the fundamental differences between historical cost accounting and the current cost accounting basis. Despite the shortcomings of historical cost accounting, there are still greater benefits obtained through it. Based on the literature review, this research finds that historical cost accounting remains relevant in decision-making.