Al Dhahira is a public limited company working since 2000. The company wants to adapt the current purchasing power method to cater to the needs of the shareholders, suppliers, creditors and employees. In order to shift from the conventional cost system to Current Purchasing Power Accounting the manager of the AlDhahira forwarded few points to be considered by the Board of Directors that may create problems in implementing the CPPA method. I) The critical problem in Inflation Accounting is training accountants and others in the preparation and interpretation of information, adjusted for the effects of inflation. II) Management may sometimes have a vested interest in maintaining the present level of profits and not make any adjustment to this profit. This may be due to the management wanting to maintain the present rate of taxation, rate of return on equity capital and so on. III) labor unions also may not agree to the adjustment of the financial statement for the effects of inflation, if they fear that as a result of the adjustment, profits and hence bonus will fall. IV) Price indices to be used for the revaluation of assets. a. II and II only b. All four points are to be considered c. I, II and III only d. I and II only

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter2: Accounting For Materials

Section: Chapter Questions

Problem 2MC

See similar textbooks

Related questions

Question

Al Dhahira is a public limited company working since 2000. The company wants to adapt the current purchasing power method to cater to the needs of the shareholders, suppliers, creditors and employees. In order to shift from the conventional cost system to Current Purchasing Power Accounting the manager of the AlDhahira forwarded few points to be considered by the Board of Directors that may create problems in implementing the CPPA method.

I) The critical problem in Inflation Accounting is training accountants and others in the preparation and interpretation of information, adjusted for the effects of inflation.

II) Management may sometimes have a vested interest in maintaining the present level of profits and not make any adjustment to this profit. This may be due to the management wanting to maintain the present rate of taxation, rate of return on equity capital and so on.

III) labor unions also may not agree to the adjustment of the financial statement for the effects of inflation, if they fear that as a result of the adjustment, profits and hence bonus will fall.

IV) Price indices to be used for the revaluation of assets.

II and II only

All four points are to be considered

I, II and III only

I and II only

Expert Solution

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions