Current cost Operating Profit
Current cost Operating Profit:
CCOP is the profit as per historical cost accounting before charging interest & taxation but after charging adjustments of cost of sales depreciation & monetary working capital.
Gearing Adjustment:
During Adjustments:
During the period of rising prices shareholders are benefited to the extend fixed assets & net working capital are financial while the amount of borrowings to be repaid remains fixed interest charges. In the same manner there is a loss to the share holders the period of falling prices.
Gering adjustment also financing adjustment like COSA & monetary working capital adjustment. This adjustment reduces the total adjustment of cost of sales depreciation & monetary working capital in the proportion of financed by borrowing to the total financing.
Gearing Adjustment = ( B / B+S ) x A
B= Avg. Net Borrowings
S= Avg. Share Holders interest
A= Total of the current cost adjustment.
Source: A/c Books & Notes
Tags: accounting, accounts, Cost, cost of goods, Credit, Current, Current Cost, debit, finance, goods, income, Loss, Management, material, Operating, Operating Profit, Profit, Profit & Loss a/c, revenue, sales, Stock
By: Management Duniya
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