COST PRINCIPLE Definition

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COST PRINCIPLE is the principle where a company is obliged to record its fixed assets at their actual purchase price or production cost.

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DEPRECIATION EXPENSE is the amount deducted from gross profit to allow for a reduction in the value of something because of its age or how much it has been used. When you buy and own equipment, your business may be entitled to deduct a depreciation expense.

NORMAL BALANCE, in accounting, is the side of an account, whether debit or credit, to which increases to the account are recorded.

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