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Inflation Accounting

Inflation Accounting. Current Purchasing Power ( CPP / GPP ) Method Under this method all items in financial statement are converted in terms of current purchasing power – general price index.

brennan-lopez
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Inflation Accounting

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  1. Inflation Accounting www.bmsproject.weebly.com, www.mymba.weebly.com

  2. Current Purchasing Power ( CPP / GPP ) Method Under this method all items in financial statement are converted in terms of current purchasing power – general price index www.bmsproject.weebly.com, www.mymba.weebly.com

  3. Monetary assets like Debtors, creditors, cash , bank balances are not restated but gains or loss on holding are determined and adjusted to Profit & loss A/c Non monetary assets – Equity , Fixed assets , investments , inventories are restated at the current purchasing power and the difference in Balance Sheet is treated as Reserves. www.bmsproject.weebly.com, www.mymba.weebly.com

  4. Ascertain the monetary result of the following at the end of 2009 1.1.09 31.12.09 Bank 2000 3000 Debtors 10000 12000 Creditors 15000 10000 Price index 100 200 ( Average 160 ) www.bmsproject.weebly.com, www.mymba.weebly.com

  5. Compute the net monetary result as on 31.12.08 1.1.09 31.12.09 • Cash 5000 10000 • Debtors 20000 25000 • Creditors 15000 20000 • Loan taken 20000 15000 www.bmsproject.weebly.com, www.mymba.weebly.com

  6. Current cost accounting method (CCA method ) - Value to the business www.bmsproject.weebly.com, www.mymba.weebly.com

  7. Current cost Profit & loss A/c should show current cost operating profit or loss – this is done by making the following adjustments - Adjustment of stocks - Adjustment of depreciation - Monetary working capital adjustment www.bmsproject.weebly.com, www.mymba.weebly.com

  8. Valuation of Balance Sheet items • Fixed assets , investments etc are valued at net current replacement cost • Monetary assets are not restated but a statement is prepared depicting the gain or loss on holding monetary assets however no adjustment is made for the same in P/L A/c www.bmsproject.weebly.com, www.mymba.weebly.com

  9. Emerging trends in accounting Need for global harmonisation - globalisation of business - movement of funds across the globe - Strategic business alliances www.bmsproject.weebly.com, www.mymba.weebly.com

  10. Efforts towards global harmonisation International Accounting Standards Board ( IASB) Institute of Chartered Accountants of India www.bmsproject.weebly.com, www.mymba.weebly.com

  11. Emerging Dimensions in Voluntary Financial reporting • Value reporting • Human Resource Accounting • Brand valuation • Economic Value Added Statement www.bmsproject.weebly.com, www.mymba.weebly.com

  12. AUDITING Do managers need to know auditing ? “ Whenever we need to know what is happening ,it is best to ask those who is responsible before asking outsiders” Risk management, internal controls , compliance requirements by various government agencies and regulators. Auditing as a tool for above Managers outlook towards auditing Alignment of auditing as a tool with managers functions i.e responding to threats and challenges. Credibility gap between auditors and managers. www.bmsproject.weebly.com, www.mymba.weebly.com

  13. Can the owners believe the report prepared by managers The report may : • contain errors • not disclose fraud • be inadvertently misleading • be deliberately misleading • fail to disclose relevant information • fail to conform to regulations www.bmsproject.weebly.com, www.mymba.weebly.com

  14. An auditor gives assurance to the users of financial statements that : • It is prepared using the generally accepted accounting principles • The provisions of Companies Act w.r.t the same has been adhered to • The provisions of Income Tax Act has been looked into • The statements are prepared in accordance with the Accounting Standards issued by ICAI www.bmsproject.weebly.com, www.mymba.weebly.com

  15. Types of audit • Statutory audit • Internal audit • Cost audit • Management audit • Operational audit • Marketing audit – Strategy / organization / System / productivity • Propriety audits • Balance Sheet Audit • Tax Audit • Investigations www.bmsproject.weebly.com, www.mymba.weebly.com

  16. Special audits Energy audits Environment audit HR audit Social audit www.bmsproject.weebly.com, www.mymba.weebly.com

  17. ISO Audit ISO 9000 – Quality Management System ISO 9001- Certifies the procedures covering the key processes in the business ISO 14000 – Environmental management standards ISO 19011 – Guidelines for quality management systems and environmental management systems audit BIS – Bureau of Indian Standards www.bmsproject.weebly.com, www.mymba.weebly.com

  18. SA ( Social Accountability ) 8000 International Standard for improving working conditions • Child labour • Health and Safety • Freedom of Association and Right to collective Bargaining • Discrimination • Working hours • Discipline • Management and compensation www.bmsproject.weebly.com, www.mymba.weebly.com

  19. Sarbanes Oxley Act 2002 ( SOX ) • US Govt. has set up a quasi public agency for overseeing, regulating, inspection and disciplining accounting firms in their roles a auditors of public companies • Setting up of Public Companies Accounting Oversight Board www.bmsproject.weebly.com, www.mymba.weebly.com

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