The money measurement concept (also called monetary measurement concept) underlines the fact that in
accounting
Accounting, also known as accountancy, is the measurement, processing, and communication of financial and non financial information about economic entities such as businesses and corporations. Accounting, which has been called the "languag ...
and
economics
Economics () is the social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services.
Economics focuses on the behaviour and intera ...
generally, every recorded event or transaction is measured in terms of
money
Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are as ...
, the local currency monetary unit of measure. Using this principle, a fact or a happening or event which cannot be expressed in terms of money is not recorded in the accounting books. Thus, it is not acceptable to record such non-quantifiable items as employee skill levels or the quality of great customer service.
One of the basic principles in historical cost accounting is "The Measuring Unit principle" (or stable measuring unit assumption): The
unit of measure
A unit of measurement is a definite magnitude of a quantity, defined and adopted by convention or by law, that is used as a standard for measurement of the same kind of quantity. Any other quantity of that kind can be expressed as a multip ...
in accounting shall be the base money unit of the most relevant currency.
This principle also assumes the unit of measure is stable; that is, changes in its general purchasing power are not considered sufficiently important to require adjustments to the basic financial statements. The inflation which occurs over the passage of time is not considered. Only those are consider which can be measured in the term of money or which are financial in nature.
[Paul H. Walgenbach, Norman E. Dittrich and Ernest I. Hanson, (1973), Financial Accounting, New York: Harcourt Brace Javonovich, Inc. Page 429.]
Accounting systems
Financial accounting
{{accounting-stub