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a)Explain why some prescriptive theorists argue that HCA should be replaced with CoCoa, a value certain system based on grocery store selling prices. Across time, limitations of diachronic approach accountancy claim been raised by number of notable scholars, specially in generation of rising prices as the terms fashion simulate assumes that mo salaryary unit is fixed and constant over time. For this reason, first, the cost model fails to turn in objective information. For example, it distorts a keep company veritable years operating results by including in the legitimate years income holding gains that actual increase in previous items. Second, there is a real problem of additivity as the cost model just adds all assets which atomic number 18 acquired by dollars of dissimilar purchasing power in different period together. Third, there are several problems down the stairs perspectives of jacket maintenance. For example, dividends should usually only be paid to the finale that the payment exit not erode financial capital but under(a) historical cost accounting. With HCA, the dividends will be distributed to owners mend no adjustment is made to take account of changes in prices and the related impact on the purchasing power of entities.

Hence, numerous normative theorists of accounting have been developed prescriptions about how unoriginal historical cost accounting ought or should be replaced by early(a) alternative cost models such as CoCoa which they considered translate more useful accounting information in time of rising prices. CoCoa or exist price accounting, in any case referred to as current cash equivalent, is a form of curr ent cost accounting which is based on valuin! g assets at their net selling prices at the balance cerement date and on the basis of ordinancely sales. Several normative theorists have argued that HCA should be replaced with CoCoa according to its advantages which are, first, CoCoa seems to tender objective information. For example, under CoCoa, profit would directly relate to changes in adaptive capital, with...If you essential to get a full essay, order it on our website: OrderEssay.net

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