Under the current value accounting method, all assets and liabilities are shown in the balance sheet at their current values.
The difference in the value of net assets at the start and end of the year is known either as profit or loss. Significantly, determining current values is not a straightforward task.
Horizon Ltd. Balance Sheet
The general index was 100 in 2009 (i.e., the base year). It was 200 in 2018 and 250 in 2019. No dividend was paid in 2019.
Required: Prepare the following:
- Supplementary Income Statement at current value.
- Supplementary Comparative Balance Sheet at current values.
Conversion of Assets at Current Values (2019 Index)
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
Loss = Current values – Historical values of current assets
= 81,250 – 65,000 = $16,250
Calculation of gain 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
Supplementary Comparative Balance Sheet at Current Values