The original intention of adopting the historical cost principle is that the purpose of the balance sheet is not to express the current situation of enterprise assets at market prices, but to reflect the financial situation and operating performance of enterprises through the comparison of capital investment and asset formation, which should be based on historical costs.

It is reasonable to follow the historical cost principle:

(1) Historical cost is the result of virtue of buyers and sellers in the market, which reflects the market price at that time and conforms to the sanitary principle;

(2) Historical cost is based on original documents, and there are verifiable methods;

(3) The historical cost data is easy to obtain, simple and easy to operate, which is related to realization principle;

(4) Historical cost valuation does not require frequent account reconciliation, which can prevent accounting records from being changed at will and maintain the reliability of accounting information.

The historical cost principle, also known as pricing at actual cost, requires that all assets of an enterprise be priced at actual cost when they are acquired. Unless otherwise stipulated by laws, administrative regulations and the unified accounting system of the state, an enterprise shall not adjust its book value by itself.

The historical cost principle is chosen as the basic criterion of accounting, mainly because the historical cost is determined when the transaction occurs and can objectively reflect the economic business or accounting matters; It has strong comparability and can stand the test; Information about historical costs is easy to obtain. However, historical cost also has inherent shortcomings, and with the development of the times, its shortcomings are becoming more and more obvious.