Money Measurement Concept Analysis

(a) Money measurement concept

Explanation about definition

Money measurement concept implies that the financial data are recorded in a financial configuration which is in monetary unit. Examples of monetary unit are Ringgit Malaysia in Malaysia and Pound Sterling in UK. The monetary value is assumed to be stable over the time. The concept of money measurement states that book of accounts only record those transactions which can be expressed in terms of monetary unit such as purchase of goods, payment of expenses or receipt of income and does not record all other transactions which cannot be expressed in terms of monetary unit such as the appointment of a manager, health of the owner of the company or strike by workers in the company.

Limitation

When we add the purchase price of different assets we bought at different periods of time inside the statement of financial position, we are actually adding diverse values. Since the book of accounts does not account for inflation, the accounting data in the accounts book does not show the true and fair value of the financial status of the company. Other than that, monetary measurement concept allows us to know only the information related to monetary value from the accounts book or statement of financial position. We cannot get the information which are not in monetary unit from accounts book or financial statements. For example, we cannot determine whether the company have good or bad employers and employees by looking at the accounts book or statement of financial positions.

(b)

(a) Dual aspect concept

Short notes:

Dual aspect is the fundamental or basic principle of accounting. It provides the

very basis to record the business transactions into the account books.

This concept states that every business transactions has a dual or two-fold effect.

Therefore, the business transactions should be recorded at both sides. In other

words, there are at least two accounts involved when we record the business

transactions. . The dual aspect concept states that every

In other words, the going

concern concept assumes that businesses will have a long life and will not be

liquidated or be sold in the immediate future. Companies expected to continue operate

are considered as going concern. Companies that are expected to be closed in the near

future are not a going concern.

Significance: The going concern concept has made a significant contributions to Generally

Accepted Accounting Principles in the area of assets. The entire concept of

amortizing assets is based on the idea that businesses will continue to operate in

the future. Assets are also recorded in the statement of financial position at historical

costs or cost prices due to the going concern assumption. If we disregard the going

concern concept and assume the business will be closed within the next year, a

liquidation approach to valuing assets would be more appropriate. Assets would be

presented at net realizable values. All assets would be considered current assets rather

than being classified as current asset and long-term