Money Measurement Concept

MONEY MEASUREMENT CONCEPT

Only financial transactions are recorded

Non-financial data are ignored

Qualitative information are ignored

Money measure at the time of transaction, no allowance for changing price level

This concept ignores important economic information

By now, knowing this concept, you should realize that the financial statements will not generate qualitative, economic and non financial information. At times, this limitation might pose a disdvantage to the users of the financial statement like the investors, funds managers,suppliers and others.

Illustration No.1:
Say if you are an investor who is interested in purchasing over a company who own a factory. In the company’s financial statement, do you think you are able to see such statistics like consumer price index, number of loyal customers, industrial output, the factory’s productivity ratio, factory staff turnover rate, number of shift, wastage % , and so on ?
The answer will be no as this concept deals with resources and obligations that can be measured and quantified into financial terms!
CONTINUED