16. Inflation Accounting is becoming more widespread. Show your ability to understand the subject by answering the questions printed below:

Accounts generally record actual historical market transactions rather than estftnated current values .. They do not try to reflect the 'true worth' of a company. Although accounts have traditionally been prepared on an historical cost basis there is now an increasing desire to allow for the falling value of money over time. A generally conservative approach is a feature of accounting treatment, although companies are increasingly inclined to become more 'realistic'?

(a) Why are the market transactions called 'historical'?

(b) In what way do conventional accounts not reflect 'true worth'?

(c) Why should there be any need to allow for the falling value of money?

(d) What is the implication of the word 'realistic'?