Current purchasing power Accounting- - Management Duniya

Current purchasing power Accounting-

Mr. A purchased a piece of land in 1982 for Rs. 50000 when the general price index is 125. He sold this piece of land in 2011 for Rs. 105000, when the general price index was 300. Calculate Profit or Loss in the sale of land keeping a side the price level changes.

Sales- cost = Profit or Loss

105000-50000 = 55000 (Profit)

Converted Value of land at 2011 Index  Rs. 50000 x 300/125 = 120000

So there is rather loss of 15000

Sales – converted value = Profit or Loss

105000 – 120000 = 15000 (Loss)

Tags: Capital, conversion, Cost, Expenditure, expenses, income, Loss, Power, Profit, Profit & Loss, Purchase, purchasing power, revenue, sales, Statement, volume
By: Management Duniya