Money Measurement Concept
Do you know that business and company valuation calculation becomes easier with money measurement concept as it considers only the transactions recorded in monetary terms? Only those transactions, which can be measured in terms of money are recorded, according to the money measurement concept. Since the medium of exchange and the standard of economic value is money, this concept requires that those transactions alone that are capable of being measured in terms of money should only be recorded in the books of accounts.
These are the advantages of the money measurement concept of accounting:
- As all the transactions are recorded it becomes easier to compare the results of one period to another.
- It helps in maintaining business records. All monetary transactions that take place in an entity are recorded.
- It forms a basis of evidence in legal matters.
- Business valuation becomes easy as money invested and lost is properly calculated.
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