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    Chapter 23 Current Cost Accounting

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    Elaine Fiona Villafuerte
    This document provides an overview of current cost accounting. It defines current cost accounting as restating historical costs in terms of current replacement costs. If the replacement cost is higher than historical cost, the difference is a holding gain, while if it is lower, the difference is a holding gain. Holding gains/losses can be realized, if from assets sold/used during the year, or unrealized. The document also discusses how various financial statement line items like inventory, property and equipment are measured and presented under current cost accounting.

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    Chapter 23 Current Cost Accounting

    Uploaded by

    Elaine Fiona Villafuerte
    158 views24 pages
    This document provides an overview of current cost accounting. It defines current cost accounting as restating historical costs in terms of current replacement costs. If the replacement cost is higher than historical cost, the difference is a holding gain, while if it is lower, the difference is a holding gain. Holding gains/losses can be realized, if from assets sold/used during the year, or unrealized. The document also discusses how various financial statement line items like inventory, property and equipment are measured and presented under current cost accounting.

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    This document provides an overview of current cost accounting. It defines current cost accounting as restating historical costs in terms of current replacement costs. If the replacement cost is higher than historical cost, the difference is a holding gain, while if it is lower, the difference is a holding gain. Holding gains/losses can be realized, if from assets sold/used during the year, or unrealized. The document also discusses how various financial statement line items like inventory, property and equipment are measured and presented under current cost accounting.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    158 views24 pages

    Chapter 23 Current Cost Accounting

    Uploaded by

    Elaine Fiona Villafuerte
    This document provides an overview of current cost accounting. It defines current cost accounting as restating historical costs in terms of current replacement costs. If the replacement cost is higher than historical cost, the difference is a holding gain, while if it is lower, the difference is a holding gain. Holding gains/losses can be realized, if from assets sold/used during the year, or unrealized. The document also discusses how various financial statement line items like inventory, property and equipment are measured and presented under current cost accounting.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 24

    Chapter 23

    CURRENT COST ACCOUNTING

    ELAINE FIONA R. VILLAFUERTE


    KEZIA CHESKA MAY Y. DUMAT-OL
    BSMA-2 (ASYNCHRONOUS)
    Technical knowledge
    To understand current cost accounting in
    constant peso accounting.
    To know the meaning of current cost.
    To determine realized and unrealized
    holding gain or loss.
    To be able to prepare financial statements
    based on current cost.
    Current Cost Accounting

     Current cost accounting is a method of


    measuring assets, liabilities, income and
    expenses at current cost at the end of
    reporting period
    o In other words, current cost accounting is the restatement of historical cost in terms
    of current replacement cost.
    o Current replacement cost is the estimated cost to acquire a similar asset at current
    purchase price.
    o The essence of current cost accounting is the recognition of a holding gain or
    holding loss.
    o If the replacement cost is higher than historical cost, the difference is a holding
    gain.
    o If the replacement cost is lower than historical cost, the difference is a holding loss.
    o Holding gain or holding loss may be classified as realized and unrealized.
    o If the asset is still unsold or unused, the holding gain or loss is said to be
    unrealized.
    o If the asset is already sold or used during the year, the holding gain or loss is said to
    be realized.
    Realized Holding
    Gain or Loss
    Realized holding
    gain or loss is the
    difference between
    current cost and
    historical cost of
    assets sold or used
    during the year.
    Preparation of Current Cost
    Income Statement
    Sales
    • Sales are made at current selling
    price throughout the period and
    therefore not restated.
    Cost of Goods Sold
    • In current cost accounting, COGS equals the current
    cost of the units sold at the time of sale.

    • In practice, cost of goods sold is equal to the


    average unit cost multiplied by the units sold during
    the period.
    Operating Expenses
    • Operating expenses are measured at current cost
    when incurred.
    • Accordingly, these expenses are already stated
    on a current cost basis.
    Depreciation
    • Depreciation is based on average current cost
    of the property, plant and equipment.
    Income Tax
    • Income tax is already on a current cost basis.
    • However, the income tax is computed on the
    basis of the income under historical cost.
    Current Cost Statement of
    Financial Position
    Cash and Receivables
    • These items are already reported on a current
    cost basis in conventional statements and are
    therefore not restated.
    Inventory
    • Inventory is stated at current cost at end of
    reporting period.
    Property, Plant & Equipment
    • Land is stated at current cost at end of reporting
    period.
    • Depreciable property, plant and equipment are
    shown at current cost minus accumulated
    depreciation based on current cost at year-end.
    Payables
    • Payables are conventionally reported on a
    current basis therefore do not require
    restatement.
    Share Capital &
    Share Premium

    • These items are not restated.


    Retained Earnings
    • The balance of
    retained earnings is
    obtained from the
    current cost statement
    of retained earnings.
    Illustration
    Income Statement
    Continuation….
    Continuation….
    Continuation….
    END OF
    PRESENTATION

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