Which of the following states that a transaction is not recorded in the books of accounts unless it is measurable in terms of money Mcq?

Which of the following states that a transaction is not recorded in the books of accounts unless it is measurable in terms of money?

This is a List of Available Answers Options :

1. Matching principle
2. Revenue recognition principle
3. Monetary unit assumption
4. Time period assumption

The best answer is C. Monetary unit assumption .

Reported from teachers around the world. The correct answer to ❝Which of the following states that a transaction is not recorded in the books of accounts unless it is measurable in terms of money?❞ question is C. Monetary unit assumption .
I Recommend you to read the next question and answer, Namely Which of the following states that the dollar does not lose its value with very accurate answers.

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What is the Money Measurement Concept?

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. For example, a high level of customer support will likely lead to increased customer retention and a higher propensity to buy from the company again, which therefore impacts revenues. Or, if employee working conditions are poor, this leads to greater employee turnover, which increases labor-related expenses.

Problems with the Money Measurement Concept

The key flaw in the money measurement concept is that many factors can lead to long-term changes in the financial results or financial position of a business (as just noted), but the concept does not allow them to be stated in the financial statements. The only exception would be a discussion of pertinent items that management includes in the disclosures that accompany the financial statements. Thus, it is entirely possible that the key underlying advantages of a business are not disclosed, which tends to under-represent the long-term ability of a business to generate profits. The reverse is typically not the case, since management is encouraged by the accounting standards to disclose all current or potential liabilities in the notes accompanying the financial statements. In short, the money measurement concept can lead to the issuance of financial statements that may not adequately represent the future upside of a business. However, if this concept were not in place, managers could flagrantly add intangible assets to the financial statements that have little supportable basis.

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