Page 49 - DCOM409_CONTEMPORARY_ACCOUNTING

Contemporary Accounting

Notes 6. Explain:
(a) Monetary Liabilities and Non-monetary Liabilities.
(b) Cost of Sales Adjustment and Gearing Adjustment.
7. What do you mean by inflation accounting? Enumerate its advantages and disadvantages.

8. “Historical accounting shows unreal profits resulting in distribution of profits out of
capital”. Offer your observations on the above statement.
9. What is the impact of price level changes on financial statements? What suggestions do
you make to disclose the effect of price level changes on the financial statements?
10. Explain with suitable examples the problems of interpretation of financial statements in
times of inflation when accounts are scrutinized under the conventional accounting system.

Answers: Self Assessment

1. True 2. True
3. False 4. True
5. False 6. historical cost
7. current cost 8. current market

9. Conversion Factor 10. Monetary
11. FIFO 12. hybrid
13. cash flow 14. inflation

15. Income-tax Act, 1961
2.9 Further Readings

Books Chandra, P., Financial Management - Theory and Practice, New Delhi, Tata McGraw
Hill Publishing Company Ltd., 2002, p. 3.
Sudhindra Bhat, Financial Management, New Delhi, Excel Books, 2008.

Van Horne, J.C. and Wachowicz, Jr, J.M., Fundamentals of Financial Management,
New Delhi, Prentice Hall of India Pvt. Ltd., 1996, p. 2.

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