Analysis and financial effects of inflation adjustment on business enterprises

Inflation defined as continuous increase in price level, decreasespurchasing power of money. Value of money becomes variable; so it lossesunit of measurement characteristic for accounting records. Most negativeimpact of this reality is that financial tables do not show the real economicposition of firms. As a result, firms? tax base is not calculated on realisticprofits.In order to remove negative effects of inflation, some different andindependent practices were brought into force. But these practices were notsuccessful enough. Instead of these practices, Inflation Accounting wasbrought into force by law numbered as 5024. This practice is based ongeneral price level accenting.Inflation, negative effects of inflation on firms, practices in Turkish TaxSystem and in other legislation in Turkey in order to remove these effects;International practices were mentioned in this study. Mainly InflationAccounting brought into force by law numbered as 5024 was examined andanalyzed.