Disadvantages of Inflation Accounting

Inflation Accounting has several disadvantages. These limitations are-

  1. A major limitation of inflation accounting is that too many calculations make inflation accounting a more complicated affair.
  2. During economic recession, only relatively low amount of depreciation is changed.
  3. The income tax authorities do not accept the system of inflation accounting.
  4. Calculating profits under historical cost is not recommended as only unrealistic profits are achieved.
  5. Price level accounting changes are not free from any prejudices.

 

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