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