The cost concept of accounting states that all acquisition of items (such as assets or things

needed for expending) should be recorded and retained in books at cost. Thus, if a balance
sheet shows an asset at a certain value it should be assumed that this is its cost unless it is
categorically stated otherwise.

The cost concept can best be characterized by saying that for purposes of accounting, all
transactions are recorded at their monetary cost of acquisition, i.e. the price paid for acquiring the
asset or for receiving the services provided. To elaborate on this concept, if an asset does not cost
anything, i.e. no money is specifically paid for its acquisition, it would not be recorded in the
books of accounts of the company. It is for this reason that the technological skills built up inside
an enterprise, the managerial or technical capabilities of an organization, the goodwill of a
company or the brand name of a product, are hot recorded as assets.