HISTORICAL COST CONVENTION Definition

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HISTORICAL COST CONVENTION is that assets are recorded at their initial cost and are not subsequently revalued upwards, and liabilities valued at the amount initially received in exchange for the obligation. The relevance of the convention is that figures remain objectively based on verifiable figures, but in times of high inflation historical cost can become a dubious convention to follow.

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RECOURSE, in finance, is the right to demand payment from the maker or endorser of a negotiable instrument (as a check). See RECOURSE NOTE.

FUNDS FLOW is the funds generated from operations; normally expressed as cash flow from operations or working capital from operations.

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