Listen to a Business English Dialogue about Original cost
Gregory: Hi Eliana, have you heard about the concept of original cost in finance?
Eliana: No, what does it mean?
Gregory: Original cost refers to the initial purchase price of an asset or investment.
Eliana: Oh, so it’s like the price you paid when you first bought something?
Gregory: Exactly. It’s the amount of money spent to acquire the asset before any adjustments or changes in value.
Eliana: I see. So, why is the original cost important in finance?
Gregory: The original cost serves as the basis for calculating capital gains or losses when the asset is sold or disposed of.
Eliana: That makes sense. So, how do you calculate the capital gains or losses using the original cost?
Gregory: You subtract the original cost from the selling price of the asset to determine the capital gain or loss.
Eliana: Got it. Are there any factors that can affect the original cost of an asset?
Gregory: The original cost may be affected by factors like purchase price, transaction fees, and any additional expenses incurred during acquisition.
Eliana: I understand. So, investors should keep track of the original cost of their assets for tax and accounting purposes?
Gregory: Absolutely. It’s essential for accurate financial reporting and tax calculations.
Eliana: Thanks for explaining, Gregory. Original cost seems like a fundamental concept for investors to understand.
Gregory: No problem, Eliana. It’s a basic principle that forms the foundation of many financial calculations and decisions.