CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Inflation is the general rise of prices in the economy as a result of an excessive supply of money. Inflation is measured as the change in purchasing power of Dollar. Glenn and Daniel (1987; 854).
Inflation is persistent in the economy today. Price inflation has affected company accounts to a great extent because it reduces the real valve of money overtime.
Inflation is relevant to company accounts in a number of ways. The phenomenon which gives rise to increase in price level makes the information on most financial reports deviate from what the person who prepared it had in mind.
Financial accounting reports should give a true and fair view of transactions that had taken place in an establishment while guiding management to a better decision for better performance. The stewardship of management is measured based on their performance as disclosed in financial statement.
Investors, Creditors, Shareholders, Employees and Government are all interested in the operation of any business enterprise. They can measure performance by a true and fair view of a financial statement which is almost impossible by the effect of inflation on these reports. Most account have been prepared according to Historical Cost Convention which means that items are recorded in the accounts at their historical cost. Similarly, the cost of goods are recorded in the account at their historical cost, and profit is calculated accordingly.
In a stable economy, prices are not expected to change in a shortrun and as a result items recorded on Historical Cost bases provides objective true and fair view of business. In the present dispensation when the entire world has found herself in a continued menace of price changes, historical cost accounting has become unrealistic (Aroh 1990: 23). Though it is not always easy to measure the rate at which movement occurs, and even to where it could be measured , it is not easy to continue adjusting.
Corporate organizations are involved. This means that a company might be making a profit on its trading operation after changing depreciation while being unable to generate enough funds internally to replace worn out fixed assets. The loss of operating capacity within the company would not be apparent from either the balance sheet or the profit and loss account (Ezejelue,1990:37).
Fixed assets deprecation, the cost of sale and funds for working capital are three aspects of accounting in historical cost account fail to provide the users of accounts with satisfactory information because of inflation: Historical cost accounting tends to overstate operating profit in the sense that if a company distribute all of its reported profit after tax as dividend to shareholders, it will be left with inadequate funds in the business to sustain operations at the same level as before at least, not without borrowing heavily or issuing new shares to raise more capital
| Project details | Contents |
|---|---|
| Number of Pages | 124 pages |
| Chapter one | Introduction |
| Chapter two | Literature review |
| Chapter three | methodology |
| Chapter four | Data analysis |
| Chapter five | Summary,discussion & recommendations |
| Reference | Reference |
| Questionnaire | Questionnaire |
| Appendix | Appendix |
| Chapter summary | 1 to 5 chapters |
| Available document | PDF and MS-word format |
DOWNLOAD COMPLETE WORK
All listed topics on our website are available project materials in PDF and MS word files, well supervised and approved by lecturers who are intellectual in their various fields of discipline, documented to assist you with complete, quality and well organized researched work. if you can't find what you're looking for feel free to contact us.
FOLLOW US