Concept Of Capital Maintenance

This concept actually tells that before any payment to the shareholder , the previous or original capital must be maintained, let say an organization have a capital of 500,000 and during the period it earns a profit of 60,000, but the inflation rate is 10%, therefore 50,000 (10% of 500,000) is required to maintain the actual capital and only 10,000 (60,000 – 50,000) is available to distribute among the shareholder.