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Advantages And Disadvantages Of Cost Accounting

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Historical cost can be defined as the original cost of an asset during transaction and recorded in an organization’s accounting record. Generally Accepted Accounting Principles stated that assets and liabilities must be recorded in balance sheet with original cost which is the purchasing cost during that time. The historical cost accounting often used in the condition where prices are constant or change slowly and yet, it does not affect the purchasing power of an item. There is no doubt on balance sheet amount because of the historical cost represented how many amount has been paid or received during the actual transactions. The advantages and disadvantages of historical cost accounting are discussed as below:
One of the advantages of historical …show more content…

Net realizable value is an exist value, an estimate of the amount an asset could be sold for in its present condition minus disposal costs. Current cost is an input or entry value, an estimate of the amount that would have to be paid currently to acquire the future economic benefits of an asset in the normal course of business (Hoggett & Edwards, 1996, p. 669). The advantages and disadvantages current value accounting are discussed as below:
One of the advantages of current value accounting is relevant for making decisions. This is because the market value of the current value accounting represents the current cost of economic transactions. Therefore, the information that provide are more appropriate and more useful because it always update to the latest information in market. It is better to use the latest information to make decisions rather than using previous information for measurement.
On the other hand, current value accounting provides an efficiency measurement. This is because the profit of the good or services will be separated and recorded as the business’s asset before it sold. The separation of business gain and business asset must be done to make sure the accuracy of calculation for a

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