Why acquisition cost matters to a first-time founder
Acquisition cost determines the amount first recorded for an asset. It can therefore affect later depreciation, inventory costs or profit when the asset is sold. A founder needs to separate costs included in the asset from costs recorded as immediate expenses. The answer depends on the asset and accounting rules.
Examples of acquisition cost
A company buys production equipment for C$80,000, pays C$3,000 for delivery and C$7,000 for required installation and testing. If its accounting rules allow those costs, the acquisition cost is C$90,000. Staff training and general administration may be immediate expenses instead of part of the asset.
Common misunderstanding
This accounting term is not customer acquisition cost, which measures marketing and sales spending used to win customers. Not every cost linked to a purchase becomes part of the asset. Funding, training, moving, deal and start-up costs may all be treated differently under the relevant rules.
When to use it
Use acquisition cost when first recording equipment, property, inventory or other bought assets and when maintaining asset records. Keep invoices and evidence for costs needed to get the asset ready. Ask an accountant about large or unusual items because the rules for adding costs to an asset differ by asset type and framework.