Which accounting concept requires assets and services acquired by the business to be recorded at their original acquisition cost?

• A. Historical Cost
• B. Fair Value
• C. Replacement Cost
• D. Net Realizable Value

Answer: (A)

The main concept tested is the historical cost principle: assets and services acquired by a business are recorded at their original acquisition cost—the amount paid to obtain them, plus any directly attributable costs to bring the asset to its present location and condition. This measurement provides objective, verifiable figures and a stable basis for depreciation and impairment over time, even as market values move. Other methods measure at current market value (fair value), the cost to replace the asset, or the net amount expected to be realized from sale, but they are not the default basis for recording assets.