Inadequacies of the traditional historic cost accounting method in times of changing price levels and the alternative methods.

Inadequacies of the traditional historic cost accounting method in times of changing price levels and the alternative methods. Essay example
Masters
Essay
Finance & Accounting
Pages 3 (753 words)
Download 0
Title: Inadequacies of Traditional Historic Cost Accounting Method in Times of Changing Price Levels and Alternative Methods Introduction: Accounting and financial calculations using traditional historic cost accounting are based on changes in the market, considering the market news and conditions to be unbiased and objective in nature…

Introduction

Inadequacies of Traditional Historic Cost Accounting: Based on the traditional historic cost accounting method, financial accounting of any business is done considering the earnings and costs that are associated only with the internal of the organization. Decisions are taken based on such measures that exclude economic transactional information without having any market value. With this technique only those external financial factors are taken into considerations that have some effects on the overall financial outcome of the business. Thus other social, economic or environmental factors are not considered in this method of accounting (Bailey, Harte and Sugden 2002). For any business organization, accounting method needs to realize the changes in prices in the market and be feasible in the process of accounting accordingly. The inadequacies with the traditional historic cost accounting method arise since the accountants used to measure transactions related to finance in terms of monetary unit. The method proved to be unstable as the monetary value keeps changing with conditions in the market. With changes in the value of the rupee or dollar or any other unit, financial statements would reflect distorted amounts. ...
Download paper
Not exactly what you need?

Related papers

USA Cost Accounting
Though Obama promised change, Government spending has continued unabated and even the risk of default on debt obligations in the beginning of August 2010 did nothing to dampen the Government’s appetite for spending. Although there was an impasse between those who supported Obama and those who didn’t, in the end common sense meant that the debt ceiling had to be increased for America to avoid…
Product Costing - Traditional Methods and Activity Based Costing
The problem here is that the tools used for production are shared by two parties and that the farm is under the control of several parties. Hence, the establishment of profit and cost centers is essential for rightly measuring the level of earnings and costs. In the system of Activity-Based Costing, the activities are mainly taken into consideration. “Activity Based Costing is a costing system…
Cost Accounting
Among the various costing methods, absorption costing and marginal costing are the two important tools that are widely used for managerial decision making. This piece of research paper describes the differences between these two methods and explains the arguments for and against these costing methods. Marginal Costing As Lucey and Lucey (2002, p. 296) defined, marginal costing is an accounting…
COST AND MANAGEMENT ACCOUNTING ESSAY
However, this paper analyzes only two branches of accounting namely financial accounting and management accounting. This report aims at analyzing these two branches in details by looking at each branch separately in regard to accounting. The paper also looks at the differences between the two branches of accounting basing on various factors. Financial accounting It is a branch of accounting that…
Cost Accounting and Management Decisions
Company Description Alcoa is an American manufacturing organisation which deals in producing primary aluminium and fabricated aluminium. Furthermore, the organisation is also known as one of the biggest drillers of bauxite and refiner of alumina in an international context. The primary products of Alcoa are divided into two major categories which are aluminium products and non-aluminium products.…
Managerial and Cost Accounting
This is because managerial accounting provides information and reports that may be used by organizations to identify areas within the organization that need additional investigation and examination. Managers use information provided by managerial accounting such as budgets to make decisions and plans. The information provided by managerial accounting can be used by managers to solve problems.…
A Comparative Analysis of Traditional Costing Method with ABC Costing Method
(Charles T. Horngren p150) Manufacturing company only produced a few types and high quantities of products before, traditional costing method which focused on direct costs were much more important than the production overheads, traditional costing would be accurate before While the production structure has changed, the times demand that flexibility and love of change replaced absorption costing…