Difference between current cost accounting and current purchasing power
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Current Cost Accounting
----The financial accounting term current cost accounting refers to an approach that values assets at their fair market value rather than historical cost. Practically, the current costs can be determined in a number of ways, including the way in which the specific price index is applied to the book value of the asset.
While as current purchasing power is a form of accounting that measures profit after allowing for the maintenance of the purchasing power of the shareholders' capital. The Retail Price Index is used to adjust for general changes in prices in order to ensure that all the shareholders' capital maintains at the same monetary purchasing power which creates balance
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Historical Cost is the cost incurred during the purchase of the fixed asset. Current cost is the book value or the remaining value or depreciated value of the fixed asset. We use both cost depending on the requirement. We record the fixed asset initially at historical cost, then, to be depreciated along its estimated useful life, net of salvage value, if any.
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