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Money Measurement Cost Concept Video Lecture - Commerce

FAQs on Money Measurement Cost Concept Video Lecture - Commerce

1. What is the money measurement concept in accounting?
Ans. The money measurement concept in accounting states that only transactions that can be expressed in monetary terms should be recorded in the financial statements. This means that non-monetary transactions, such as employee morale or customer satisfaction, are not considered in the financial statements as they cannot be measured in monetary terms.
2. How does the money measurement concept affect financial reporting?
Ans. The money measurement concept ensures that financial statements only include transactions that can be quantified in monetary terms. This concept helps in providing reliable and comparable financial information to users of the financial statements. It allows for the measurement and reporting of assets, liabilities, income, and expenses in a consistent and meaningful way.
3. Can the money measurement concept be applied to all transactions?
Ans. No, the money measurement concept cannot be applied to all transactions. Some transactions, such as those involving qualitative aspects like employee satisfaction or brand reputation, cannot be measured in monetary terms. Therefore, such transactions are not recorded in the financial statements.
4. What are the limitations of the money measurement concept?
Ans. The money measurement concept has certain limitations. It fails to capture the value of non-monetary assets like goodwill or intellectual property, which can be valuable to a company. Additionally, it does not account for changes in the value of money over time, leading to potential distortions in financial reporting.
5. How does the money measurement concept impact decision-making?
Ans. The money measurement concept provides decision-makers with financial information that is based on quantifiable transactions. This allows for better analysis and comparison of financial performance across different periods or companies. However, decision-makers need to be aware of the limitations of this concept and consider other qualitative factors when making informed decisions.
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