Historical Cost Basis is an accounting method that values assets and liabilities at their original purchase price. This means the balance sheet reflects what was actually paid for items when they were acquired by the company. By adhering to historical cost basis, companies can accurately report the total value of their assets over time to provide reliable financial statements. Valuing assets in this fashion makes it easier to calculate taxes, profits and losses since the original cost of goods can be compared directly with current market prices. As a result, current and prospective investors have greater insight into the company’s performance.