The Historical Cost Principle Accounting is a method of accounting founded on the premise that assets and liabilities should be recorded at their original purchase price. This means that the value of an asset or liability is reported in its financial statements as the amount paid for it when initially acquired. In other words, a business must record the dollar amount of each transaction that it enters into by utilizing the current market value of exchanged goods. This approach to recording expenses provides an accurate depiction of a company’s financial health in relation to their economic situation over time.