Money Measurement Assumption in accounting course

2. Course Title: Seminar on Accounting
Course Code: AIS:110

3. Money Measurement Assumption in accounting, also
known as Measurability Concept, means that only
transactions and events that are capable of being
measured in monetary terms are recognized in the
financial statements.

4. The recognition criteria defined by IASB and
FASB require that the elements of financial
statements (i.e. assets, liabilities, income and
expense) must only be recognized in the
financial statements if its cost or value can be
measured with sufficient reliability. Therefore,
an entity shall not recognize an element of
financial statement unless a reliable value can
be assigned to it.

5. The investors has known, because, it assures
them that they will continue to get income on
their investments in future.
Why Money Measurement
Is Important

6. TheAdvantages
1. It makes it easier to aggregate and
summarize transactions, and compare
financial statements.
2. The concept is appropriate as
business is about money, and it is easily
understood and convenient for internal
and external users of the financial
statements.

7. 1. It limits the usefulness of information in the
financial statements because non-financial items are
ignored (eg loyalty of workforce, management skills,
size of customer base).
2. The value of money is not stable due to
inflation/deflation and, if business has international
transactions, the value of money fluctuates with
exchange rates

8. 1.Opened a bank account by depositing 2,000
It can be measured in terms of money. It
reduces the cash balance of the business.
2. Received pass book from bank
It can not be measured in terms of money