The historical cost accounts of Smith plc are as follows: Statement of financial position of Smith

The historical cost accounts of Smith plc are as follows: Statement of financial position of Smith plc as at 31 December 20X8 Notes 1 Land and buildings were acquired in 20X0 with the buildings component costing £800,000 and depreciated over 40 years. 2 Share capital was issued in 20X0. 3 Closing inventories were acquired in the last quarter of the year. 4 RPI numbers were: Average for 20X0 …… 120 20X7 last quarter …… 216 At 31 December 20X7 ….. 220 20X8 last quarter ……. 232 Average for 20X8 …… 228 At 31 December 20X8 …… 236 Required: (i) Explain the basic concept of the CPP accounting system. (ii) Prepare CPP accounts for Smith plc for the year ended 20X8. The following steps will assist in preparing the CPP accounts: (a) Restate the statement of comprehensive income for the current year in terms of £CPP at the year-end. (b) Restate the closing statement of financial position in £CPP at year-end, but excluding monetary items, i.e. trade receivables, trade payables, cash at bank. (c) Restate the opening statement of financial position in £CPP at year-end, but including monetary items, i.e. trade receivables, trade payables and cash at bank, and showing equity as the balancing figure. (d) Compare the opening and closing equity figures derived in (b) and (c) above to arrive at the total profit/loss for the year in CPP terms. Compare this figure with the CPP profit calculated in (a) above to determine the monetary gain or monet