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(65)-THE MONEY MEASURMENT CONCEPT

Thursday, December 31, 2009

The Money Measurement Concept

The money measurement concept states that accounts will only deal with those items to which a monetary value can be attributed.

For example, in the balance sheet of a business monetary values can be attributed to such assets as machinery and stocks of goods.

The money measurement concept introduces limitations to the subject matter of accounts. A business may have intangible assets such as the flair of a good manager or the loyalty of its workforce. These may be important enough to give it a clear superiority over an otherwise identical business, but because they cannot be valued in monetary items they do not appear anywhere in the accounts.

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