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Profit Measurement under General Price Level Accounting

Journal of Commerce and Accounting Research

Volume 2 Issue 2

Published: 2013
Author(s) Name: Someshwari T., Mahadevappa B. | Author(s) Affiliation: University of Mysore, Mysore, India.
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Abstract

This study aims to examine the differences in profit and earning per share under historical cost accounting and general price level accounting system and to correlate them with current market price. A simple random sample of four companies was drawn from thirty BSE SENSEX companies. Financial statements of 2001-02 to 2010-11 were restated under general price level accounting system. The main finding of the study was that the inflation is recurring feature in India. The figure of profit under historical cost accounting is inflated and illusory. The degree of relationship of Earning per Share with current market price of shares under historical cost accounting is higher than general price level accounting. The study suggests to show the inflated adjusted data as supplementary information to make a decision for investors and policy makers.

Keywords: Trend of Inflation, Historical Cost Accounting, General Price Level Accounting, Earning per Share, Financial Statements

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