What is the money measurement concept? Which one factor can make it difficult to compare the monetary values of one year with the monetary values of another year?

Answer: The money measurement concept states that the transactions all those transactions which can be recorded in the monetary terms should be recorded in the books of the account. This concept thus does not lend scope for the qualitative factors such as skills of employee, durability of the products and the goods produced, efficiency of the administrations etc. 

The major drawback of this concept is that it considers the historical cost i.e. the costs that were incurred during the time when they were bought. Hence it does not factor the purchasing capacity of the company of the business and hence it can actually deteriorate the financial results of any company.

Mayank Rai

Hi, My name is Mayank Rai. I found that Blogging is an easiest way to share your knowledge with everyone & learn something new from there.

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