I. Historical cost principle of historical cost method The historical cost principle, also known as the original cost principle or the actual cost principle, refers to the recording of accounting elements, which should be measured and valued on the basis of the acquisition cost when economic business occurs. According to this measurement requirement of accounting elements, the acquisition, consumption and conversion of assets should be measured and recorded according to the actual expenditure when acquiring assets; The acquisition and repayment of liabilities are measured, priced and recorded according to the actual expenditure of acquiring liabilities. Assets minus liabilities V. Owners' equity is naturally priced at historical cost, which is different from replacement value, realized value and market price on the reporting date.

Adopting the historical cost principle has many advantages:

First, it is more objective. Historical cost or actual cost is the amount determined by buyers and sellers through normal transactions;

Second, there is an original basis. That is, the invoice can be used as proof and can be verified at any time;

Third, it can prevent enterprises or related personnel from intentionally changing book records under certain needs;

Fourth, simplify accounting procedures and do not need to adjust accounts frequently.

The limitation of the historical cost principle is that when the price fluctuates greatly or the currency is unstable, the historical cost cannot truly reflect the financial status and operating performance of the accounting entity, thus weakening the usefulness of accounting information and affecting the current decision-making.