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Define money measurement concept in accounting?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 rakkesh asked almost 3 years ago

Hi, What is money measurement concept in accounting?

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9 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Surbhi answered over 2 years ago

Define money measurement concept in accounting?

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 acharya answered over 2 years ago

The efficiency of administrative processes All of the preceding factors are indirectly reflected in the financial results of a business, because they have an impact on either revenues, expenses, assets, or liabilities. For example, a high level of customer support will likely lead to increased customer retention and a higher propensity to buy from the company again, which therefore impacts revenues. Or, if employee working conditions are poor, this leads to greater employee turnover, which increases labor-related expenses.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered almost 3 years ago

The money measurement concept states that a business should only record an accounting transaction if it can be expressed in terms of money. This means that the focus of accounting transactions is on quantitative information, rather than on qualitative information. Thus, a large number of items are never reflected in a company's accounting records, which means that they never appear in its financial statements.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 CA Sandeep Bohra answered almost 3 years ago

> Money measurement concept in accounting --The money measurement concept underlines the fact that in accounting and economics generally, every recorded event or transaction is measured in terms of money, i.e., the local currency monetary unit of measure. --Another important aspect of the concept of money measurement is that the records of the transactions are to be kept not in the physical units but in the monetary unit. For example, a company may have a factory on a piece of land measuring 5 acres, 10 machinery, 50 personal computers etc.Since these assets are expressed in different units, so cannot be added to give any meaningful information about the total worth of business. Hence for accounting purpose, these are to be shown in money terms and not in physical terms. --However money measurement assumption is not free from limitations. Due to inflation, the value of money does not remain the same over a period of time, Therefore, in the balance sheet, when we add different assets bought at different points of time we are in fact adding diverse values,. Since the inflation is not accounted for in the book of accounts, the accounting data does not reflect the true and fair value of the company.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered almost 3 years ago

Employee skill level Employee working conditions Expected resale value of a patent Value of an in-house brand Product durability The quality of customer support or field service The efficiency of administrative processes All of the preceding factors are indirectly reflected in the financial results of a business, because they have an impact on either revenues, expenses, assets, or liabilities. For example, a high level of customer support will likely lead to increased customer retention and a higher propensity to buy from the company again, which therefore impacts revenues. Or, if employee working conditions are poor, this leads to greater employee turnover, which increases labor-related expenses.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 lochan answered almost 3 years ago

The concept of money measurement states that only those transactions which can be expressed in terms of money such as purchase of goods or payment of expenses or receipt of income, etc. are to be recorded in the book of accounts. All other transactions which cannot be expressed in monetary terms, for example, the appointment of a manager, health of the owner of the company or strike in the company by workers are not recorded in the books of accounts. Another important aspect of the concept of money measurement is that the records of the transactions are to be kept not in the physical units but in the monetary unit. For example, a company may have a factory on a piece of land measuring 5 acres, 10 machinery, 50 personal computers etc… Since these assets are expressed in different units, so cannot be added to give any meaningful information about the total worth of business. Hence for accounting purpose, these are to be shown in money terms and not in physical terms. However money measurement assumption is not free from limitations. Due to inflation, the value of money does not remain the same over a period of time, Therefore, in the balance sheet, when we add different assets bought at different points of time we are in fact adding diverse values,. Since the inflation is not accounted for in the book of accounts, the accounting data does not reflect the true and fair value of the company. Thanks

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Open uri20170510 32134 1c996lj?1494421732 Anil answered almost 3 years ago

Money measurement concept. From Wikipedia, the free encyclopedia. The money measuremet concept underlines the fact that in accounting and economics generally, every recorded event or transaction is measured in terms of money, i.e., the local currency monetary unit of measure. Money Measurement Concept in Accounting Definition Money Measurement Concept in accounting, also known as Measurability Concept, means that only transactions and events that are capable of being measured in monetary terms are recognized in the financial statements. Explanation All transactions and events recorded in the financial statements must be reduced to a unit of monetary currency. Where it is not possible to assign a reliable monetary value to a transaction or event, it shall not be recorded in the financial statements. However, any material transactions and events that are not recorded for failing to meet the measurability criteria might need be disclosed in the supplementary notes of financial statements to assist the users in gaining a better understanding of the financial performance and position of the entity. Recognition Criteria The recognition criteria defined by IASB and FASB require that the elements of financial statements (i.e. assets, liabilities, income and expense) must only be recognized in the financial statements if its cost or value can be measured with sufficient reliability. Therefore, an entity shall not recognize an element of financial statement unless a reliable value can be assigned to it. In many cases however the preparers of financial statements are unable to arrive at a precise amount to be recognized in the financial statements and must resort to the use of reasonable estimates in arriving at an approximate value. The use of reasonable estimates is a very important component in the preparation of financial statements and as long as forming estimates do not involve a high degree of subjectivity and uncertainty they do not undermine the reliability of financial information. Where a significant element of financial statement is not recognized because of the inability to measure its monetary value with sufficient reliability, it may be disclosed in the supplementary notes of financial statements to enhance the users' understandability and completeness of the presented financial information. Examples of Application Skills and competence of employees cannot be attributed an objective monetary value and should therefore not be recognized as assets in the balance sheet. However, those transactions related to employees that can be measured reliably such as salaries expense and pension obligations are recognized in the financial statements. Where it is not possible to measure reliably the amount of settlement of a legal claim against the company, no liability is recognized in the financial statements. Instead, the nature and circumstances surrounding the lawsuit are disclosed in the supplementary notes to the financial statements if considered material. IAS 38 Intangible Assets and ASC 350 Intangibles - Goodwill and Other require that internally generated goodwill shall not be recognized as an asset in the balance sheet. This is due to the difficulty in identifying and measuring the cost of internally generated goodwill as distinct from the cost of running the day to day operations of the business. However, IFRS 3 Business Combinations and ASC 805 Business Combinations permit purchased goodwill to be recognized as an asset in the financial statements since the cost of purchased goodwill is usually determinable objectively as the amount of consideration paid in excess of the value of other identifiable assets of the acquired business.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 jitendra etikala answered almost 3 years ago

The money measurement concept states that a business should only record an accounting transaction if it can be expressed in terms of money. This means that the focus of accounting transactions is on quantitative information, rather than on qualitative information. Thus, a large number of items are never reflected in a company's accounting records, which means that they never appear in its financial statements. Examples of items that cannot be recorded as accounting transactions because they cannot be expressed in terms of money include: 1.Employee skill level 2.Employee working conditions 3.Expected resale value of a patent 4.Value of an in-house brand 5.Product durability 6.The quality of customer support or field service 7.The efficiency of administrative processes All of the preceding factors are indirectly reflected in the financial results of a business, because they have an impact on either revenues, expenses, assets, or liabilities. For example, a high level of customer support will likely lead to increased customer retention and a higher propensity to buy from the company again, which therefore impacts revenues. Or, if employee working conditions are poor, this leads to greater employee turnover, which increases labor-related expenses. The key flaw in the money measurement concept is that many factors can lead to long-term changes in the financial results or financial position of a business (as just noted), but the concept does not allow them to be stated in the financial statements. The only exception would be a discussion of pertinent items that management includes in the disclosures that accompany the financial statements. Thus, it is entirely possible that key underlying advantages of a business are not disclosed, which tends to under represent the long-term ability of a business to generate profits. The reverse is typically not the case, since management is encouraged by the accounting standards to disclose all current or potential liabilities of a business in the notes accompanying the financial statements. In short, the money measurement concept can lead to the issuance of financial statements that may not adequately represent the future upside of a business. However, if this concept were not in place, managers could flagrantly add intangible assets to the financial statements that have little supportable basis.

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Open uri20170510 32134 s5bvk0?1494421637 ARJUN PRATAP SINGH answered almost 3 years ago

Dear Friend, as far as your query is concerned that Define money measurement concept in accounting? Let me informed that The money measurement concept states that a business should only record an accounting transaction if it can be expressed in terms of money. This means that the focus of accounting transactions is on quantitative information, rather than on qualitative information. Thus, a large number of items are never reflected in a company's accounting records, which means that they never appear in its financial statements. Examples of items that cannot be recorded as accounting transactions because they cannot be expressed in terms of money include: Employee skill level Employee working conditions Expected resale value of a patent Value of an in-house brand Product durability The quality of customer support or field service The efficiency of administrative processes All of the preceding factors are indirectly reflected in the financial results of a business, because they have an impact on either revenues, expenses, assets, or liabilities. For example, a high level of customer support will likely lead to increased customer retention and a higher propensity to buy from the company again, which therefore impacts revenues. Or, if employee working conditions are poor, this leads to greater employee turnover, which increases labor-related expenses. The key flaw in the money measurement concept is that many factors can lead to long-term changes in the financial results or financial position of a business (as just noted), but the concept does not allow them to be stated in the financial statements. The only exception would be a discussion of pertinent items that management includes in the disclosures that accompany the financial statements. Thus, it is entirely possible that key underlying advantages of a business are not disclosed, which tends to under represent the long-term ability of a business to generate profits. The reverse is typically not the case, since management is encouraged by the accounting standards to disclose all current or potential liabilities of a business in the notes accompanying the financial statements. In short, the money measurement concept can lead to the issuance of financial statements that may not adequately represent the future upside of a business. However, if this concept were not in place, managers could flagrantly add intangible assets to the financial statements that have little supportable basis. Hope answer was helpful to you Regards, Arjun Pratap Singh

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