'accounting records transactions and events that can be measured in money terms only. this is both an advantage as well as limitation of accounting.' give reasons
Answers
Answer:
Yes. Accounting records only financial transaction and events. It is an advantage as transactions of diverse nature are recorded using a common yardstick, i.e., money. But there are other important transactions and events which many have far-reaching effect on business. They are not recorded because they cannot be measured in money terms. For example, production loss due to labour strike. Thus, it is a limitation to that extent.
Answer:
Money measurement concept
Explanation:
The money measurement concept states that a business should only record an accounting transaction if it can be expressed in terms of money. This means that the focus of accounting transactions is on quantitative information, rather than on qualitative information. Thus, a large number of items are never reflected in a company's accounting records, which means that they never appear in its financial statements. Examples of items that cannot be recorded as accounting transactions because they cannot be expressed in terms of money include:
Employee skill level
Employee working conditions
Expected resale value of a patent
Value of an in-house brand
Product durability
The quality of customer support or field service
The efficiency of administrative processes
All of the preceding factors are indirectly reflected in the financial results of a business, because they have an impact on either revenues, expenses, assets, or liabilities.