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Physical capital maintenance

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Physical capital maintenance

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by P2-D2.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • December 1, 2021 at 2:37 pm #642211
    Nguyen
    Member
    • Topics: 14
    • Replies: 13
    • ☆

    Hi tutor,

    Could you please help me with the question 16 in KIT book?

    The ‘physical capital maintenance’ concept states that profit is the increase in the physical productive capacity of the business over the period. This concept is applied in:
    A. Current cost accounting
    B. Historical cost accounting
    C. Current value accounting
    D. Current purchasing power accounting

    Could you please explain why the answer is A? Thank you in advance.

    December 11, 2021 at 11:58 am #643905
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6440
    • ☆☆☆☆☆

    Hi,

    Current cost accounting incorporates using the up to date values of assets in the accounts so that they are up to date with the most recent values. As physical capital maintenance looks at keeping the current operational capacity of the business reflected in the accounts then by using CCA and updating the cost to reflect the current value of assets/liabilities in times of changing prices then it is applying the physical capital maintenance concept.

    Thanks

    December 12, 2021 at 3:19 pm #644076
    Nguyen
    Member
    • Topics: 14
    • Replies: 13
    • ☆

    Thank you so much.

    December 27, 2021 at 8:18 pm #644929
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6440
    • ☆☆☆☆☆

    You’re welcome!

  • Author
    Posts
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