Inflation Accounting Concept

AFM Definition, Scope & Accounting Standards including Ind AS Free JAIIB Capsule 36 views Updated 23 Sep 2026

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AFM · Definition, Scope & Accounting Standards including Ind AS

Financial statements often fail to reflect the true picture due to the assumption of a stable monetary unit. Which type of accounting addresses this?

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Inflation Accounting. It adjusts the value of assets (current and fixed) and profits in light of changes in the price level.

It aims at correcting the distortions in reported results caused by rising prices, which otherwise tend to overstate profit.

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Inflation Accounting Concept — Full Text

Financial statements often fail to reflect the true picture due to the assumption of a stable monetary unit. Which type of accounting addresses this?

Answer

Inflation Accounting. It adjusts the value of assets (current and fixed) and profits in light of changes in the price level.

Additional notes

It aims at correcting the distortions in reported results caused by rising prices, which otherwise tend to overstate profit.

Part of Accounting & Financial Management for Bankers · Definition, Scope & Accounting Standards including Ind AS · Last updated 23 Sep 2026

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