Answer / sameer.d.ghadge

Alteration of a firm's financial statements to account for
changes in the purchasing power of money. With inflation
accounting, gains and losses from holding monetary items
during periods of changing prices are recognized. Likewise,
long-term assets and liabilities are adjusted for changing
price levels. Inflation accounting is used to supplement
regular financial statements in order to illustrate how
changing price levels can affect a firm. Also called
general price level accounting.

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