Chapter 3, Problem 6Q

To determine

Historical Cost Principle: The historical cost concept of accounting (cost principle) states that each and every item should be recorded at its cost (purchased value), not at its fair value while preparing any financial statement because there is no availability of document regarding fair value as evidence for recording, till that item is not sold in the market.

Adjustment Entries: Adjusting entries are those entries which are made at the end of the year to update all the balances in the financial statements to show the true financial information and to maintain the records according to accrual basis principle.

To explain: Historical cost concept requires adjusting entries or not.