Money measurement
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The money measurement concept (also called monetary measurement concept) underlines the fact that in accounting and
economics Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyzes ...
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 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