Effects of Price Changes on Financial Statements

Accounting for Effect of Price Level Changes

In SFAS 33, the evaluation of research and professional pronouncements on the subject of “accounting for the effect of price-level changes” is traced by the two inflation accounting models: historical cost/constant dollar and current cost. The two models are discussed below- Constant-Dollar (or general price-level) Accounting (CDA): Constant-dollar accounting is advocated by those who want…

Difference Between Monetary and Non-Monetary Items

A monetary item is an asset or liability carrying a value in dollars that will not change in the future. These items have a fixed numerical value in dollars, and a dollar is always worth a dollar. Monetary assets (such as cash and accounts receivable) and monetary liabilities (such as notes and accounts payable) have…

Financial Statements: Definition, Component, Importance

Financial statements are integrated information of recorded events, accounting conventions and individual judgment capacity.