Question

What are the various ways of adjusting financial statements for changing prices?

Answer 1

Answe:

The Various ways to adjust finincial statements of changing Prices are:

1.  Current price

2. Customer Ability to pay

3. Replacement Cost Accounting

4. Current value

1. Current price  : In currnt price the assets and liabalities of the company are recoreded in the current value rather than the value at which it was acquired. All the assets and laibalities recored are at the current price it which can be received in today.

2. Customer ability to pay : Cusromer ability to pay  is done with the recording of all assets and liabalities of the company at the the historical cost.

But another suplement is needed which contains the current value of the customer ability to pay which is regulated by the goverment. So a copy of goverment customer price must be attached with the balance sheets.

3. Replacement Cost accounting: In  replacement cost accounting the company takes the index or price rather than the customer ability price index provided by the goverment.

4. Current Value : In current value all the assets and the liabalitiues of the company are recorded in the current value rather than the value at the time of acquiring them. All comapny expenses are charged in current value of asstes rather than book value.