What is exchange price or cost?

The exchange-price principle is essential for maintaining the integrity of financial records. It ensures that transactions are recorded accurately and transparently, allowing stakeholders to make informed decisions based on reliable financial information.

The principle applies to all types of exchanges, including the sale of goods and services, the transfer of assets, and the exchange of financial instruments. By adhering to this principle, accountants can ensure that transactions are recorded consistently and comparably across different entities.

The exchange-price principle is a fundamental concept in accounting that governs the recording of transfers of resources. This principle ensures that transactions are accurately reflected in financial statements, providing a clear picture of an entity's financial position.

The exchange-price principle also promotes fairness in financial transactions. By requiring that resources be recorded at their fair market value, it prevents parties from manipulating prices to their advantage. This helps to maintain trust in the financial system and promotes economic stability.

According to this principle, accountants must record the transfer of resources at the price agreed upon by the parties involved in the exchange. This means that the price recorded should be the fair market value of the resources exchanged at the time of the transaction.