Money Measurement Assumption

Money Measurement Assumption in accounting course

1. Welcome to Presentation

2. Money Measurement Assumption Course Title: Seminar on Accounting Course Code: AIS:110

3. Money Measurement Assumption in accounting, also known as Measurability Concept, means that only transactions and events that are capable of being measured in monetary terms are recognized in the financial statements. DEFINITION

4. The recognition criteria defined by IASB and FASB require that the elements of financial statements (i.e. assets, liabilities, income and expense) must only be recognized in the financial statements if its cost or value can be measured with sufficient reliability. Therefore, an entity shall not recognize an element of financial statement unless a reliable value can be assigned to it. Recognition Criteria

5. The investors has known, because, it assures them that they will continue to get income on their investments in future. This concept facilitates preparation of financial statements. Why Money Measurement Is Important

6. The Advantages 1. It makes it easier to aggregate and summarize transactions, and compare financial statements. 2. The concept is appropriate as business is about money, and it is easily understood and convenient for internal and external users of the financial statements.

7. 1. It limits the usefulness of information in the financial statements because non-financial items are ignored ( eg loyalty of workforce, management skills, size of customer base). 2. The value of money is not stable due to inflation/deflation and, if business has international transactions, the value of money fluctuates with exchange rates Disadvantages

8. 1.Opened a bank account by depositing 2,000 It can be measured in terms of money. It reduces the cash balance of the business. 2. Received pass book from bank It can not be measured in terms of money Example

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