This paper develops algebraic representations of the various possible distortions that inflation can introduce in financial statements, and of the associated corrections that have been developed by accountants. Adjustments to balance sheets and income statements are presented for two basic cases: general inflation, and inflation cum changing relative prices. Empirical evidence concerning the impact of these adjustments is reviewed, and it is noted that when inflation rates are substantial, the change in accounting figures can be quite dramatic. .
All Science Journal Classification (ASJC) codes
- Economics, Econometrics and Finance(all)