Limitation or Advantage of Accounting Records Transactions and Events that can be Measured in Money Terms

There is no denying that accounting records transactions and events that can be measured in money terms. This means that every transaction and event is expressed in financial terms, and there is no other way to express it. This has both advantages and limitations.

Advantages of Accounting Measuring in Money Terms

1. Uniformity: The use of monetary terms provides uniformity in accounting. This means that all the transactions and events are recorded in the same currency and can be compared easily.

2. Precision: Accounting records transactions and events in financial terms, which makes it easy to measure, record, and analyze them with precision.

3. Easy to Interpret: Financial statements that are prepared from accounting records are easy to interpret, which makes it easier for stakeholders to understand the financial position of the organization.

4. Facilitates Decision Making: Accounting records can be used to make informed decisions. For instance, by analyzing financial statements, management can decide whether to expand the business or not.

Limitations of Accounting Measuring in Money Terms

1. Non-Monetary Transactions: Accounting cannot record non-monetary transactions. For instance, the value of customer loyalty cannot be measured in financial terms.

2. Subjectivity: The use of money terms in accounting can sometimes be subjective, as the value of an asset or liability can be influenced by various factors such as market conditions.

3. Ignores Intangible Assets: Accounting records only tangible assets, which means that intangible assets such as goodwill, patents, and trademarks are not recorded.

4. Ignores Social Costs: Accounting does not take into account social costs such as environmental degradation, which can have a significant impact on the society and the organization.

In conclusion, accounting measuring in money terms has both advantages and limitations. While it provides uniformity, precision, and facilitates decision making, it also ignores non-monetary transactions, subjectivity, intangible assets, and social costs. Therefore, accounting should be used in conjunction with other methods to provide a complete picture of the financial position of an organization.

According to me it is limitation of accounting because, non monetary transactions also play an important role in the business's growth, for instance, skill of labour, it is of great importance which is an advantage to the business as well as the proprietor.