MONEY MEASUREMENT CONCEPT:
Only those transactions are recorded in books of account which can be expressed in money. Those transactions which cannot be expressed in money fall beyond the scope of accounting. One serious shortcoming of this concept is that the money value of that date is recorded on which transaction has taken place and later on due to inflation when changes in money value take place, these changes are not considered.
Effects of this concept:
1.In the absence of this concept, it would have not been possible to add various possessions. For example a proprietor has 400 chairs, 10 machines,500 acre of land and 200 tables. He cannot add them, but by finding out their values in money, total amount of all these possessions can easily be found out.
2.Ability of the boards of directors, quality of the articles produced and efficiency of workers cannot be recorded as these are not expressed in money. Thus, this concept has both merits and demerits.
Only those transactions are recorded in books of account which can be expressed in money. Those transactions which cannot be expressed in money fall beyond the scope of accounting. One serious shortcoming of this concept is that the money value of that date is recorded on which transaction has taken place and later on due to inflation when changes in money value take place, these changes are not considered.
Effects of this concept:
1.In the absence of this concept, it would have not been possible to add various possessions. For example a proprietor has 400 chairs, 10 machines,500 acre of land and 200 tables. He cannot add them, but by finding out their values in money, total amount of all these possessions can easily be found out.
2.Ability of the boards of directors, quality of the articles produced and efficiency of workers cannot be recorded as these are not expressed in money. Thus, this concept has both merits and demerits.
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