Backlog Depreciation

Definition of Backlog Depreciation Whenever an asset is revalued, the profit on revaluation is transferred to Revaluation Reserve Account. But, the revaluation also gives rise to a backlog depreciation. This backlog depreciation should be charged to Revaluation Reserve Account. The concept of backlog depreciation can be followed by the help of the below illustration. Formula … Read more

Calculation of Depreciation Adjustment under Current Cost Accounting Technique

The Current Cost Accounting method assets are shown in the balance sheet on current replacement costs after allowing for depreciation. This will require an adjustment in depreciation too. Formula Current year’s depreciation under CCA can be calculated with the help of following formula: And, Depreciation Adjustment = Current year’s depreciation on CCA – Depreciation on … Read more

Merits and Demerits of Inflation Accounting

High inflation results in more profits and high financial difficulties. The dividend and income taxes are paid on increased profit calculated on the basis of historical cost concept. Therefore a change from historical cost concept to price level or inflation accounting is recommended to show the correct profit and true and fair of balance sheet. … Read more

Limitations of Historical Cost Accounting

Following are some limitations of historical cost accounting: (i) Failure to disclose current worth of the enterprise. The accounts presented on the basis of historical concept do not show many effects which are due to the inflation gap. Thus, the true and fair view is not shown. (ii) Uncomparable items in financial statements. Sometimes due … Read more

What is dividend policy?

Meanings of Dividend Dividend is the payment to shareholders in lieu of their share capital. It is that portion of profits of a Company which is distributable among its shareholders according to the resolution passed in the meeting of Directors. This may be a fix percentage on the share capital or at fixed per share. … Read more