What is historical cost convention in SAP FI-AA - Asset Accounting?

SAP Term: historical cost convention

• Component: FI-AA

• Component Name: Asset Accounting

• Description: An accounting method whereby assets are valued for balance sheet purposes at their acquisition price.

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• Key Concepts: 
  The historical cost convention is an accounting principle that states that assets should be recorded at their original cost when they are acquired. This means that the value of an asset should not be adjusted for inflation or other factors. This convention is used in SAP FI-AA Asset Accounting to ensure that the value of an asset is accurately reflected in the company's financial statements.
  
  How to use it: 
  In SAP FI-AA Asset Accounting, the historical cost convention is used to record the acquisition of assets. When an asset is acquired, its cost is recorded in the system and this cost is not adjusted for inflation or other factors. This ensures that the value of the asset is accurately reflected in the company's financial statements.
  
  Tips & Tricks: 
  When recording an asset acquisition in SAP FI-AA Asset Accounting, it is important to ensure that the correct cost is recorded. This will ensure that the value of the asset is accurately reflected in the company's financial statements. Additionally, it is important to keep track of any changes in the value of an asset over time, as this can affect its value on the company's financial statements.
  
  Related Information: 
  The historical cost convention is just one of many accounting principles used in SAP FI-AA Asset Accounting. Other principles include fair value accounting, revaluation accounting, and depreciation accounting. It is important to understand how these principles work together to ensure accurate financial reporting. Additionally, it is important to understand how these principles interact with other areas of accounting, such as taxation and auditing.