Chapter 10 Price accounting

The learning goals of price accounting

1.Three stages of inflation accounting

2.the general price level accounting
3.current cost account
4.nominal currency
5.common dollar
6.financial capital
7.physical capital
8.financial capital maintenance
9.physical capital maintenance
10.accounting income
11.economic income
12.Holding assets income
13.monetary items
14.purchasing power gain or loss
15.price index
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Section 1 The limitations of historical cost

accounting

The limitations of historical cost accounting

basic characteristics of historical cost accounting
measurements in nominal monetary units
measurement attributes of the historical cost
revenue realization principle
concern assumption
matching concept
The limitations of historical cost accounting
the assets cannot reflect its real value
the profits cannot reflect the operating results
the intelligibility of accounting information descends
the enterprises reproduction capacity declines

Section 2 the general price level

accounting

1.the feature of the general price level accounting

2.the accounting process of the general price level
accounting
3.the feature of monetary items
4. the feature of nonmonetary items
5. the adjustment of project amount
6. the calculation of purchasing power gains or loss
7. the advantages of general price level accounting
8.the disadvantages of general price level accounting

Section 2 the general price level

accounting

1.two different types of price changes

the changes of general price level
the changes of particular price level
2.processing methods of the general price level accounting
divide monetary items and non-monetary items
monetary items: the monetary fund and debtor and creditor account of fixed
amount ; the direct influence of price changes; Reflecting the purchasing
power at end of the period no need to adjust.
monetary items: the monetary fund and debtor and creditor account of fixed
amount ; the direct influence of price changes; reflecting the purchasing power
at end of the period no need to adjust
non-monetary items: not directly affected by the influence of price changes; the
historical cost reflects the past purchasing power; adjusted for the purchasing
power at the end of the period.

Section 2 the general price level

accounting

convert the nominal currency into common dollar

confirm the period of achieving a project
confirm the price index when the project is achieved
compile tabulation to demonstrate the current price
index
calculate the coefficient
conversion
calculate the purchasing power of monetary items
recompile the accounting statement according to the
general price level

Example

Company B bought a batch of goods which valued

50000 dollar from Company A on June 1. Company B
paid off the money on January 2 next year.
June 1
January 2

Price index
150
165

accounts receivable
50000
50000

purchasing power
55000
50000

The purchasing power of company A's accounts

receivable losses 5000 dollar.
The purchasing power of company B's accounts payable
gains 5000 dollar.
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Section 3 Current Cost Accounting

1. the characteristics of the current cost
accounting
2.current cost accounting procedures
3.loss of assets held view
4. current cost accounting income
5. maintain production profit and loss account
6. added to the depreciation account
7. advantages of current cost accounting
8. present the shortcomings of cost accounting

Section 3 Current Cost Accounting

1.current cost accounting basis of economic
theory
the cost of compensation theory
monetary theory of capital preservation
theory of physical capital preservation
2.with the current cost valuation of assets
3. holding gains and losses of properties and
calculation
unrealized; has been achieved

Section 3 Current Cost Accounting

4.Current

Cost Accounting Example

5. Current Cost Accounting /Nominal currency
accounting section
the current cost and revenue ratio
elimination of individual price changes
adjustment is the measurement properties

Section 4 Comparison of various

accounting models
1.Capital maintenance concept
2.Reliability
3.Intelligibility
4.Relevance and comparability
5.Information costs and benefits of 6.restraint
7.Economic impact

Section 4 Comparison of
various accounting models
Accounting model

capital maintenance concept

The historical cost/nominal money

beginning of the number of capital in the

name of the currency

The historical cost/common dollar

beginning of the purchasing power of

capital

current cost /nominal money

measured in nominal currency beginning

viability

current cost /common dollar

The currency equivalent viability

measured at the beginning

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