The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Inflation Accounting

  • G. Whittington
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_788

Abstract

The adjustment of the accounts of business enterprises to reflect the consequences of inflation has been the subject of considerable theoretical controversy and practical experimentation in recent years, as a result of historically high inflation rates. The traditional valuation basis of accounts is historical cost, and the gap between historical values and current values tends to be widened by inflation. Furthermore, historical cost accounting does not reflect the gain on borrowing, which arises from having a liability which is fixed in nominal monetary units, in a period of inflation, or its counterpart, the loss on holding money, or assets denominated in nominal monetary units (such as trade debts).

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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • G. Whittington
    • 1
  1. 1.