Principles of Financial Accounting (B.Com) 1st Sem Previous year Solved Question Paper 2022

The maximum loss method, also known as the Maximum Equal Eminence Method or the Greatest Extreme Method, is a technique used in piecemeal distribution or apportionment. This method is typically employed when you need to allocate a finite resource among several recipients or entities, and you want to ensure that the entity with the greatest need or loss receives the maximum share.

Here’s how the maximum loss method works:

1. Identify the entities or recipients involved in the distribution.
2. Determine the loss or need for each entity. This loss can represent a variety of factors, such as
financial need, workload, or any other relevant metric that indicates the level of need for the resource being distributed.
3. Find the entity with the highest loss or greatest need. This entity will receive the maximum share of the resource.
4. Allocate the resource to this entity, covering its maximum loss or need.
5. After allocating the maximum share to the neediest entity, calculate the remaining loss or need
for each of the remaining entities.
6. Repeat steps 3 to 5 until the entire resource is distributed.

The key principle behind the maximum loss method is to prioritize those entities with the greatest need or loss, ensuring that they receive the most significant allocation. It is a useful approach In scenarios where you want to address disparities in need or loss among the recipients.
Conclusion : The maximum loss method is just one of many possible methods for piecemeal distribution, and the choice of method may depend on the specific context and objectives of the distribution process.