Question

Non monetary transaction are not recorded in the book of account.explain

Answer 1

Non monetary transaction are not recorded in book of accounts. For example, the skill level of the human resource an organisation possess.

The same is not recorded because it can be measured. It is intangible and just cant be measured or valued.

For recording anything in accounts you need to report it in monetary terms which is not possible in case of non-monetary transactions.

Answer 2

Answer:

Money Measurement Concept restricts the entry of non-monetary transactions.

Explanation:

Non-monetary transactions are not recorded in the book of account because of the Money measurement concept.

According to the Money Measurement concept:

• Only those transactions are recorded in books of account which can be expressed in terms of money only. Those transactions which can not be expressed in terms of money fall beyond the scope of accounting.
• Only quantitative terms can be entered in accounting books because they are measurable, countable, physically touched, and seen.
• Qualitative terms cannot be entered into the books of account as they are not measurable, countable, physically touched, and seen.

For example:

• Purchase of Machinery for Rs50,000. It is a monetary transaction and it can be measurable, countable, physically touched, and seen. hence entered in books of account.

On the other hand,

• The ability of BOD,
• Quality of the articles
• efficiency of workers

cannot be recorded as these are not expressed in terms of money.

Therefore, Money measurement allows only those transactions which can be measured in terms of money and should be in quantitative form.

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