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Money Measurement Concept Video Lecture | Accountancy Class 11 - Commerce

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FAQs on Money Measurement Concept Video Lecture - Accountancy Class 11 - Commerce

1. What is the money measurement concept?
Ans. The money measurement concept is an accounting principle that states that all business transactions should be recorded in monetary terms in the financial statements. This concept assumes that only transactions that can be expressed in monetary values are considered relevant and can be objectively measured and compared.
2. Why is the money measurement concept important in accounting?
Ans. The money measurement concept is important in accounting as it allows for the uniform and consistent measurement of business transactions. By expressing transactions in monetary terms, it becomes easier to record, analyze, and compare financial information. It also helps in assessing the financial performance and position of a business.
3. How does the money measurement concept affect non-monetary assets?
Ans. The money measurement concept does not apply to non-monetary assets such as goodwill, patents, trademarks, or customer loyalty. These assets are not recorded in the financial statements since their value cannot be objectively measured in monetary terms. However, if these assets are acquired through a monetary transaction, their cost can be recorded.
4. Can the money measurement concept be a limitation in financial reporting?
Ans. Yes, the money measurement concept can be a limitation in financial reporting. It restricts the inclusion of important qualitative information that cannot be expressed in monetary terms, such as the skills and expertise of employees or the reputation of a company. This limitation can affect the overall usefulness and relevance of financial statements.
5. How does the money measurement concept affect the valuation of inventory?
Ans. The money measurement concept requires the valuation of inventory at its cost or net realizable value, whichever is lower. This means that the historical cost of acquiring or producing inventory is recorded, and any subsequent changes in its market value are not reflected until it is sold. This conservative approach ensures that inventory is not overstated in the financial statements.
82 videos|105 docs|42 tests

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