The following information has been given for January 1st 2022 Monetary Assets Rs.400,000 Monetary Liabilities Rs.300,000 Retail Price Index: As on January 1st 2022 100 As on December 31st 2022 120…

Step 1: Calculate Net Monetary Position (NMP) as of January 1, 2022 NMP = Monetary Assets – Monetary Liabilities = Rs. 400,000 – Rs. 300,000 = Rs. 100,000

Step 2: Apply Retail Price Index (RPI) adjustment RPI adjustment factor = $\frac{\text{RPI at year-end}}{\text{RPI at year-start}}=\frac{120}{100}=1.2$

Step 3: Compute adjusted NMP Adjusted NMP = NMP × RPI adjustment factor = Rs. 100,000 × 1.2 = Rs. 120,000

Step 4: Determine net monetary gain/loss Net monetary gain = Adjusted NMP – Original NMP = Rs. 120,000 – Rs. 100,000 = Rs. 20,000 (gain)