Inflation technology

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Since we started understanding things around us, we all used to listen from our Grandparents about the things and articles especially Gold & Ghee being cheaper in their times.
That time we used to think that why the things were cheaper in our Grandparents' time and why had they started becoming costlier. So this question would keep us puzzled.


Effect of Inflation on Business
The impact of inflation on business can be bifurcated into two parts like

1. Impact on costs and revenue
2. Impact on assets and liabilities
As far as impact of inflation on costs and revenues is concerned, definitely both will rise but whether they result into extraordinary profits will be determined by that how much opening stock was available at old prices with the company and how much later the demand for increasing wages is entertained by the company


Inflation Accounting and its significance
The impact of inflation comes in the form of rising prices of output and assets. As the financial accounts are kept on Historical cost basis, so they don't take into consideration the impact of rise in the prices of assets and output. This may sometimes result into the overstated profits, under priced assets and misleading picture of Business etc.


History of Inflation Accounting
In the last few years, inflation accounting has been adopted as a supplementary financial statement in the United States and the United Kingdom. This comes after more than 50 years of debate about methods of adjusting financial accounts for inflation.