PRINCIPLES OF ACCOUNTS

A LIMITATION OF THE MONEY MEASUREMENT CONCEPT IS THAT

  • A. it results in inaccurate financial statements
  • B. financial statement is not easily understood
  • C. important non-monetary activities are not reported ✓
  • D. the reports are not comparable to that of other businesses

 

The money measurement concept states that only transactions that can be expressed in terms of money can be recorded in the financial statements. This means that only transactions that have a monetary value, such as the sale of goods or services, can be recorded. One limitation of this concept is that important non-monetary activities, such as the value of a company’s reputation or the quality of its products, cannot be reported in financial statements. This means that important aspects of a company’s performance may not be reflected in its financial reports. This can lead to an incomplete picture of the company’s overall financial health and performance.

In other words, the limitation of the money measurement concept is that important non-monetary activities are not reported. This concept refers to the principle in accounting that only transactions and events that can be expressed in monetary terms are recorded in financial statements. As a result, important non-monetary activities such as employee satisfaction, customer loyalty, or environmental impact are not captured in traditional financial reports, leading to an incomplete picture of a company’s overall performance and value.

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