what is original cost 
original cost is the total price associated with the purchase of an asset the original cost of an asset takes into consideration all of the items that can be attributed to its purchase and to putting the asset to use these costs include the purchase price and such factors as commissions transportation appraisals warranties and installation and testing original cost can be used to value an asset type including equipment real estate and security instruments original cost is also known as an asset s cost basis for tax purposes understanding original costoriginal cost includes all quantifiable facets of a purchased asset for example a company purchases of a piece of equipment with a price tag of 20 000 the purchase also involves 1 000 in fees 700 in shipping and delivery costs and 3 000 for installation and warranty the original cost of this piece of equipment would be 20 000 1 000 700 3 000 24 700 also known as historical cost a common term in generally accepted accounting principles gaap this is the original cost recorded on the balance sheet the balance sheet and notes to financial statements will separate historical cost property plant and equipment pp e and accumulated depreciation of these long term assets the difference is known as carrying value original cost and depreciationdetermining an asset s original cost is important in calculating the asset s tax basis the original cost of an asset encompasses more than the asset s purchase price and the costs added together can reduce the potential taxable gain on the sale of the asset the tax basis can be calculated by taking the original cost and subtracting the accumulated depreciation of the asset for the piece of equipment above suppose accumulated depreciation is 14 700 the carrying value on the company s books would be 10 000 24 700 original cost less 14 700 accumulated depreciation if the company sells the asset for 15 000 it would record a gain on asset sale of 5 000 