Disadvantages of Inflation Accounting
Inflation Accounting has several disadvantages. These limitations are-
- A major limitation of inflation accounting is that too many calculations make inflation accounting a more complicated affair.
- During economic recession, only relatively low amount of depreciation is changed.
- The income tax authorities do not accept the system of inflation accounting.
- Calculating profits under historical cost is not recommended as only unrealistic profits are achieved.
- Price level accounting changes are not free from any prejudices.
Links of Previous Main Topic:-
- Introduction inventory pricing and valuation
- Standard costing introduction
- Management accounting
- Marginal costing
- Relevant cost for decision making
- Budget and budgetary control
- Limitations of historical accounting
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