Current Value Accounting Technique

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on June 22, 2021

In Current Value Accounting method, all Assets and liabilities are shown in the balance sheet at current values. The value of Nett Assets in the beginning and at the end of the year the difference is known as profit or loss as the case may bc. The determination of current values is not so easy.

Example

The Balance Sheet of Horizon Ltd.

Current value accounting technique
The general index was 100 in 2009 (base year), 200 in 2018 and 250 in 2019. No dividend was paid in 2019.
You are required to prepare:

  1. Supplementary Income Statement at current value.
  2. Supplementary Comparative Balance Sheet at current values.

Solution

Conversion of Assets at Current Values (2019 Index)

Current value accounting technique example
Conversion of liabilities at current value 2019
Sundry Creditors: 250/200, 25,000, 30,000, 31,250, 30,000
Calculation of loss for holding current assets
Current value accounting technique solution
Loss = Current Values – Historical Values of Current Assets
= 81,250 – 65,000 = $16,250
Calculation of Gain Arising from current liabilities
From Sundry Creditors (Current Value – Historical Values)
= 31,250 – 25,000 = $6,250
Net Loss from holding Current Assets and Current Liabilities
= 16,250 – 6,250 = $10,000

Supplementary Income Statement at Current Values

Current value accounting technique example solved

Supplementary Comparative Balance Sheet at Current Values

Current value accounting technique solved

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