Money Measurement Principle

As per money measurement principle, we record the transactions and events which we can show in money. All the transactions and events which we can not measure in the money, we can not  record in our accounting books. Main benefit of this is to show accounting reports correctly and saving of time of users of such accounting reports.

For example, two employees started quarrel and both went to home with peaceful agreement. This is the event but we can not measure its effect in the money but due to quarrel, there is the loss of stock $ 20,000, this event's effect can be measured in the money. We know, there is big risk of loss of asset of company due to quarrel. So, One side, our closing stock will less with this loss and second side, it is the decrease of our capital. So, base of accounting record is that we can express this event in the money. There is no use of Rs. 20,000 stock due to quarrel. Like this, we record all the transactions and events if we show them in the money form. It will help us for taking important decision. Our accounting record now helps us to get Rs. 20,000 from employees through court. If there is only one employee is responsible whole Rs. 20,000 may be taken from him.

We record the raw material, finished stock, machines, furniture, building because we can say we have raw material of $ 300000, we have finished goods of $ 600000, we have machines of $ 600000. We have to pay the loan of $ 700000. All these assets and liabilities can easily measure in one common unit and its name is money. So, money measurement principle helps us to concentrate our record on all those transactions and events which we can measure in the money.

Personal Views

Some natural assets should be recorded and business has to take the social responsibility for caring all these natural assets. Business forgets the water, pure air which came from trees from its business places. Recently, as per social accounting, both social cost and social benefits are started to measure in money and on this basis, corporate business started to help for natural resources safety. 






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Accounting Education: Money Measurement Principle
Money Measurement Principle
Accounting Education
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