Current Cost Accounting

This method requires each item of financial statements to be restated in terms of current value of that item. The profits are computed on the oasis of "what the cost would be at  the date of rate" rather than the actual amount paid. 

The method has the objective of ensuring adequate provisions/adjustments for the maintenance aid replacement or fixed assets and stocks. Its main features are : 

1. Fixed assets are to be shown at their value to the business and not at their depreciated original cost. 
2. Stocks are to be shown at their value to the business and not at the lower of their original cost and realizable value. 
3. Depreciation for the year is to be calculated on the current  value of the relevant fixed assets. 
4. The cost of stock consumed  during the year is calculated 011 Ule value to the  
5. business of the stock at the date of consumption  and not at the date of purchase.
6. The effect of loss or gain from loans should be computed and set off against interest. 

Fixed Assets 

The "Fixed Assets" in the balance sheet should be shown at their "value to the business" which illegals the amount which the company would lose, if it were deprived of the assets. This may be defined in any one of the following ways : 

Net Replacement Value 

This refers to the money now required to buy a new asset of the sane type as the existing one less an amount of depreciation which recognizes the fact that the true replacement of an asset would not be a new asset but an asset which has the same remaining useful life as the existing asset. For example, if an equipment whose toted life is 10 years and which has already run for 5 years can now be purchased at a new price of Rs. 60000. Assuming that the machine has no scrap value, the net replacement cost of the machine will be Rs. 60000  depreciation for 5 years, i.e. Rs. 30000. 

Net Realization Value 

This represents the net cash proceeds if the existing asset is sold now. 

Economic Value 

This refers to the present value of the net income that will be earned from using the existing asset during the rest of its life. For instance, if the net cash inflow is Rs. 8000 per annual during the remaining  life, say of 5 yeas. The income will be Rs. 40,000. Since this will accrue over a period of 5 years, if should be discounted at a proper rate and  the "present value" of the future net cash inflows worked out. 

Out of the above mentioned three methods, the "Net Replacement Value" method is recommended  for use by the Accounting Committee of UK under "Standards" laid down.