Historical cost, also known as the original cost, is the monetary value assigned to an asset at the time of its purchase or the amount recorded for a liability when it is incurred. This measurement basis is widely used in accounting for the consistent documentation of financial transactions and reporting purposes.

For example, if a company purchases machinery for $50,000, those $50,000 would represent the machinery's historical cost. The historical cost does not change over time due to fluctuations in market value. Instead, it stays constant and provides a reliable baseline for accounting.

Although historical cost is consistent and reliable, it does not reflect the current market value of assets and liabilities over time, which may be significantly different. Alternative valuation methods, like fair value accounting, are sometimes used to address this limitation.