Overview
The historical cost principle states that assets and liabilities should be recorded in the books at their actual cost, that is, the amount paid or received for them. This means that even if an asset is purchased at a discounted price, (that is a bargain), it is to be recorded at the price paid, not at the price that is normally charged for the asset.
While this may mean that balance sheet is not an accurate reflection of the true value of the assets and liabilities listed, it is an important control to that makes it harder to cook the books.