The money measurement concept in accounting explained.

The money measurement concept in accounting explained

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. read more

Current asset turnover ratio – meaning and formula

reason why absolute assurance is impossible in auditing

The current assets turnover ratio ascertains the efficiency with which current assets are used in a business. This ratio is strongly associated with the efficient utilization of cash, receivables, and inventory. A higher value of this ratio indicates greater circulation of current assets while a low ratio indicates a stagnation of the flow of current assets. read more

Meaning, objectives, and nature of ratio analysis.

Meaning, objectives, and nature of ratio analysis.

A ratio expresses the numerical relationship between two numbers. In the words of Kennedy and McMullen, “the relationship of one item to another expressed in simple mathematical form is known as a ratio”. Thus, the ratio is a measuring device to judge the growth, development and present condition of concern. It plays an important role in measuring the comparative significance of the income and position statement. Accounting ratios are expressed in the form of time, proportion, percentage, or per one rupee. Ratio analysis is not only a technique to point out the relationship between two figures but also points out the devices to measure the fundamental strengths or weaknesses of a concern. read more

Revision question on how to perform the bank reconciliation

Revision question on how to perform the bank reconciliation

The following is a summary from the cash book of BW Ltd for July 2015:

On investigation, it was discovered that:

i)   Bank charges of TZS 15 shown on the bank statement have not been entered into the cash book.

ii)  A cheque drawn for TZS 110 to pay a supplier has been entered in the cash book as a receipt. read more