In accordance with the going concern concept, it is usually assumed that the life of a business is indefinitely long. But owners and other interested parties cannot wait until the business has been wound up for obtaining information about its results and financial position. For example If for ten years no accounts have been prepared and if the business has been consistently incurring losses, there may not be any capital at all at the end of the tenth year which will be known only at that time. This would result in the compulsory winding up of the business. But, if at frequent intervals’ information is made available as to how things are going, then corrective measures may be suggested and remedial action may be taken. That is why Pacioli wrote as early as in 1494: ‘frequent accounting makes for only friendship’. This need leads to the accounting period concept.
This concept is the core of accounting. According to this concept, every business transaction has a dual aspect. This concept is explained in detail below:
The properties owned by a business enterprise are referred to as assets and the rights or claims to the various parties against the assets are referred to as equities. The relationship between the two may be expressed in the form of an equation as follows:
Accounting records only those transactions which can be expressed in monetary terms.
The importance of money measurement concept is that money provides a common denomination by means of which heterogeneous facts about a business enterprise can be expressed and measured in a much better way. For e.g. When it is stated that a business owns TZS.1,00,000 cash, 500 tons of raw material, 10 machinery items, 3000 square meters of land and building etc., these amounts cannot be added together to produce a meaningful total of what the business owns. However, by expressing these items in monetary terms such as TZS.1,00,000 cash, TZS.5,00,000 worth raw materials, TZS,10,00,000 worth machinery items, and TZS .30,00,000 worth land and building – such addition is possible.
Labour Mix or Gang Composition Variance arises due to change in the actual gang composition than the standard gang composition. This variance shows to the management how much labour cost variance is due to the change in labour composition.