HISTORICAL COST CONVENTION Definition

Bookmark and Share

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.

Learn new Accounting Terms

OVER-BILLING is invoicing in excess of agreed upon pricing or exaggerating the amount of services or goods provided (sometimes illegally).

ACCOUNTING INCOME is the income derived through historical accrual based accounting. Income = the change in net assets occurring during the period excluding transactions with owners; i.e. transaction based.

Suggest a Term

Enter Search Term

Enter a term, then click the entry you would like to view.