What is Original Cost?

Original cost is the price paid to initially acquire an asset. This cost is considered to include the cost to buy an asset, transport the asset to where it is intended to be used, install it, and test it. Original cost also includes sales taxes and other levies. Original cost is the cost at which an asset is recorded in the general ledger. It may subsequently be reduced in the general ledger if the market value of the asset is less than its depreciated cost or amortized cost.

Example of Original Cost

Baltimore Corporation purchases a large production machine for $50,000. Additional costs associated with this purchase are $1,000 in sales tax, a $2,000 freight delivery charge, $4,000 for the pouring of a concrete pad, and $1,500 for electrical wiring. The aggregate total of these costs is an original cost for the machine of $58,500.