Capital maintenance in a period of inflation.
The capital maintenance reveal the goals, spur actions and
provide check or control. Such that exceptional profit oriented goal
performance can be achieved and on the reverse, adequate punishment to be
exercised for bad performance.
Capital maintenance is the replacement of on enterprise’s
resources used up or consumed in the production of foods and services. An
enterprise has maintained its capital if it has a much capital at the end of
the period as it had at the beginning of the year. Any amount over and above
that required to maintain the capital at the beginning of the period is profit.
Note that the capital to be maintained is the original
investment expressed in common monetary terms or in current replacement values.
It is believed that capital maintenance help management is
an enterprise to plan for future. If any justification is required for this
project on the capital maintenance in a period of inflation.
Firstly, the managers should penitents into every cranny of
the enterprise and indoctrinated all management in their working habits.
Secondary capital should be given the maximum attention
while emphasis on the effects.
Finally, it is now very clear from the research that
inflation has a tremendous impact on the capital maintenance of manufacturing
companies in particular and the economy in general.
The word inflation is not new phenomenon; it has been
experienced by most countries in the world at some stage in their history. Mere
looking at this statement ones mind will really, run to developing countries.
But it is in history that even the UNITED KINGDOM in 1974 when they could no longer sit back
and watch inflation run them set up “The inflation Accounting committee” with
Francis Sandilands as chairman to look into the problem. Even the Almighty
UNITED STATES OF AMERICA went through it sometime in the sixties before they
come to they present economic stability. So, one will not be surprised when
countries like ours and some other like the Asian countries and even Latin
American Countries are mentioned as suffering from this CANKER WORM called
There are so many definitions. Solow (1979) for instance,
sees inflation as going on when one needs more and more money to buy some
representative bundle of goods and services, or a sustained fall in the
purchasing power of money. It is a sustained rising trend in the general price
level or put in another way, it is a high and persistent rise in the price