The accounting idea that every event or transaction recorded in a company’s accounts is assessed in monetary terms. For a business, the money measurement concept means that items that are not quantifiable in monetary terms like goodwill, customer service quality and staff skill levels are not included in account records.
In financial accounting a record is made only of information that can be expressed in monetary terms. In other words. no accounting is possible for an event or transaction which is not measurable in terms of money.
Money Measurement Concept Example
passing an examination. delivering lecture in a meeting. winning a prize etc. These are events no doubt. but since these are not measurable in terms of money. there is no question of their accounting.
Measurement of business events in money helps in understanding the state of affairs of business in a much better way. For example; If a business owns. 1500 kg of stock. one car. 1500 square feet of building space etc. these amounts cannot be added to produce a meaningful total of what the business owns. However. if a these items are expressed in monetary terms such as stock Rs.24000. car RsJOO.OOO and building Rs.500.000. all such items can be added in better way and precise estimate about the assets of the
business will be available.
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