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.