Meaning of Accounting for changing Prices
Meaning of Accounting for changing Prices:
Accounting for changing prices is also known as inflation accounting, because changes in the prices are usually on the upward side.
Accounting for changing price (Inflation accounting) is a system of accounting which regularly records all items in financial statements at their current values. The system recognises the fact that the purchasing power of money is decreasing day by day during inflation & finds how profits or loss are states the financial position of the business, on the basis of the current prices prevailing in the economy.
Approaches to Price level Accounting (Inflation Accounting)
At present there are 4 approaches.
Current purchasing power accounting
Current cost accounting
Specific & general price level accounting
Periodic revaluation of fixed assets along with the adoption of LIFO method of inventory.
Source: A/c Books & Notes
Tags: Account, accountant, accounting, analysis, Benefits, Cost, Expenditure, expenses, finance, historical cost, income, Loss, Management, Profit, Profit and Loss, revenue, sales, tax, volume
By: Management Duniya
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