Cost Principle

Accounting Terms Dictionary

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Cost Principle

Using the original purchase price to value assets.

If you buy a piece of land in 1950 for $10,000 and it is currently worth $400,000 GAAP requires that you list the value of the land as $10,000 for balance sheet purposes. The land is listed at its original cost. This is not the case for IFRS, international accounting.

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