What is Money Measurement Concept?
Money measurement concept can be defined as the concept under which the business needs to record only those transactions that can be expressed in terms of money. Money measurement concept undertakes only quantitative transactions and not qualitative ones. Qualitative transactions never get recorded in the books of accounts and thus never get reflected in financial statements. Quantitative transactions can be said to have a direct effect on the business whereas qualitative transactions have an indirect effect on the business.
Geeky Takeaways:
- Money measurement concept creates a single dominator for the purpose of measurement of performance, namely money.
- This concept records only monetary transactions i.e. transactions that can be expressed in terms of money like, cash sales, cash purchases, assets sold for cash or on credit, salaries, rent, shares, etc.
- This concept does not record those transactions that can not be expressed in terms of money like employee skill level, product durability, the efficiency of administrative processes, etc.
Table of Content
- Components of Money Measurement Concept
- Example of Money Measurement Concept
- Significance of Money Measurement Concept
- Limitations of Money Measurement Concept