Here is the synopsis of our sample research paper on INFLATION ACCOUNTING. Have the paper e-mailed to you 24/7/365.
Essay / Research Paper Abstract
This 3-page paper discusses the concept of inflation accounting, which takes into account the shift in monetary values. Bibliography lists 3 sources.
Page Count:
3 pages (~225 words per page)
File: AS43_MTinflacct.rtf
Buy This Term Paper »
Unformatted sample text from the term paper:
variety of theories and methods in which accounting systems are tweaked for various reasons. The problem with basic accounting is that it assumes that all monetary units in all economies
of the world are stable (Smith, 2007). But this is not the case. Once such tweak, or theory, is inflation accounting, which
is a system that adjusts values of inflow and outflow as it pertains to purchasing power of money - in other words, inflation (Smith, 2007). Inflation has two components: Monetary
(cash inflation) and non-monetary (historical cost accounting inflation) (Smith, 2007). Cash inflation, by its very nature, destroys the purchasing power of money and monetary items, and so needs to be
treated differently. Inflation accounting, also sometimes known as general price level accounting, recognizes gains and losses from holding monetary items during
periods of changing prices (Scott, 2003). Furthermore, under this particular type of accounting, long-term assets and liabilities are adjusted to take into account changing price levels (Smith, 2007). Inflation accounting
isnt used in place of regular statements, but rather, it supplements regular financial statements to demonstrate how changing price levels (as well as the decreasing value of money) impact a
firm (Smith, 2007). Myddelton (1992) has pointed out that companies that dont make inflation adjustments in their financial reporting also have
issues when it comes to determining the difference between profit and loss. Though the literature doesnt point to specific companies that use inflation accounting, some of the literature does explain
what happens when companies dont use it. Myddeltons example focused on ICI plc, a firm in the United Kingdom, that relied on historical cost accounting, which measures profit or loss
...