What Is Price Level Accounting?

General price level accounting refers to the adjustment of various accounting data in historical cost accounting statements according to the current general price index, thereby eliminating the impact of changes in general price levels, and reflecting the financial status and operating results of the enterprise by the current purchasing power of currency at the end of the period. General price level accounting uses an accounting model: historical cost / constant purchasing power currency unit. The main feature of general price level accounting is to replace currency units that are constantly depreciating with constant purchasing power currency units. The specific operation method is to adjust the accounting statements under historical cost / nominal currency through general prices at the end of the period.

General price level accounting

General price level accounting

1. Does not accurately reflect the actual changes in the value of various types of assets of the enterprise

2. Does not accurately reflect the true financial status and operating results of the enterprise

3 Difficulty distinguishing between monetary and non-monetary items