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DETERMINING COST OF SALES IN THE CCA SYSTEM
Author(s) -
Das Nikhil R.,
Fraser David J.
Publication year - 1981
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/j.1467-629x.1981.tb00118.x
Subject(s) - cost accounting , profit (economics) , capital cost , cost of capital , capital (architecture) , business , capital equipment , operating cost , economics , accounting , operations management , industrial organization , microeconomics , macroeconomics , history , archaeology
The profit concept in the Current Cost Accounting system is based on the objective of maintaining “capital” in the sense of “operating capability”. This paper seeks to demonstrate that the recommended capital maintenance adjustment of the Australian Provisional Accounting Standard on “Current Cost Accounting”, as it relates to cost of sales, is inappropriate for the stated capital maintenance objective. This appears to be because operating capability is a dated concept, since it is the operating capability existing at the beginning of an accounting period which is to be maintained. An alternative adjustment for cost of sales is proposed which is consistent with the stated capital maintenance objective.