Which of these factors makes historical cost effective for recording transactions?

Historical cost is an accounting principle that relies on the actual costs incurred when a transaction occurs. The effectiveness of historical cost in recording transactions stems from the use of reliable and verifiable information. This means that the amounts recorded reflect actual, documented transactions, providing a solid foundation for financial reporting.

When an asset is acquired and recorded at its historical cost, the information has been substantiated by actual transactions such as receipts or invoices, reducing subjectivity and potential manipulation. This reliability is crucial for stakeholders, including investors and regulators, who depend on accurate financial statements to make informed decisions.

While other factors such as flexibility or instant feedback might seem beneficial, they do not support the fundamental principle of historical cost which prioritizes objectivity and accuracy over estimates or subjective judgments. Thus, the strength of historical cost accounting lies in its ability to provide a consistent and trustworthy basis for evaluating a company's financial condition.