real terms accounting

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A system of accounting in which the effects of changing prices are measured by their effect on a company’s financial capital (i.e. shareholders’ equity) to see if its value is maintained in real terms. Assets are measured at current cost. Profit is defined as any surplus remaining after the shareholders’ funds (determined by reference to the current cost of net assets) have been maintained in real terms. The unit of measurement may be either the nominal pound or the unit of constant purchasing power.

Subjects: Financial Institutions and Services — Accounting.

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