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What is the important of money measurement concept?

What is the important of money measurement concept?

Money measurement concept helps in the preparation of financial statements. As all the transactions are recorded it becomes easier to compare the results of one period to another. It forms a basis of evidence in legal matters.

What is money measurement concept Class 11?

Money Measurement : The concept of money measurement states that only those transactions and happenings in an organisation, which can be expressed in terms of money are to be recorded in the book of accounts. Also, the records of the transactions are to be kept not in the physical units but in the monetary units. 3.

What is going concern concept with example?

Examples of Going Concern A state-owned company is in a tough financial situation and is struggling to pay its debt. The government gives the company a bailout and guarantees all payments to its creditors. The state-owned company is a going concern despite its poor financial position.

What is money measurement concept why this concept is also limitation?

A limitation of the monetary measurement concept is that items that impact a company’s future financial results are not recorded. The monetary measurement concept assumes that the value of currency remains stable and does not change.

How is money measured?

M1 and M2 money are the two mostly commonly used definitions of money. M1 = coins and currency in circulation + checkable (demand) deposit + traveler’s checks. M2 = M1 + savings deposits + money market funds + certificates of deposit + other time deposits.

What is money measurement concept which one factor can make it difficult to compare?

The factor which can make it difficult to compare the monetary values of one year with the monetary values of another year is inflation. Explore more such questions and answers at BYJU’S.

What is the measurement of cash?

The cash ratio is a liquidity measure that shows a company’s ability to cover its short-term obligations using only cash and cash equivalents. The cash ratio is derived by adding a company’s total reserves of cash and near-cash securities and dividing that sum by its total current liabilities.

What is the concept of an entity explain it with an example?

Under the business entity concept, a business holds separate entity and distinct from its owners. ” The entity view holds the business ‘enterprise to be an institution in its own right separate and distinct from the parties who furnish the funds” An example is a sole trader or proprietorship.

What is materiality concept with example?

A classic example of the materiality concept is a company expensing a $20 wastebasket in the year it is acquired instead of depreciating it over its useful life of 10 years. The reason is that no investor, creditor, or other interested party would be misled by immediately expensing the $20 wastebasket.

What are the 3 measures of money?

provides three measures of money – M1, M2, and M3, where M1 is the narrowest and M3 the broadest.

What defines money?

Money is a commodity accepted by general consent as a medium of economic exchange. It is the medium in which prices and values are expressed. It circulates from person to person and country to country, facilitating trade, and it is the principal measure of wealth.

What is money measurement concept which one factor?

Money Measurement Concept mainly refers to those events that can be expressed in monetary terms and are recorded in the books of accounts. Thus, the money measurement concept enables consistency in maintaining accounting records.

What is the unit of measurement for money?

A unit of measurement that applies to money is called a unit of account in economics and unit of measure in accounting. This is normally a currency issued by a country or a fraction thereof; for instance, the US dollar and US cent (​1⁄100 of a dollar), or the euro and euro cent.

What is monetary measurement?

monetary measurement. Accounting concept that money (as the common medium of exchange) is the sole accounting unit of measurement, and that only economic activities measurable in money are recorded.

What are the basic concepts of accounting?

These basic accounting concepts are as follows: Accruals concept. Revenues are recognized when earned, and expenses are recognized when assets are consumed. Conservatism concept.

What is the monetary unit assumption?

Monetary Unit Assumption The monetary unit assumption means that money is the common denominator of economic activity and provides an appropriate basis for accounting measurement and analysis. That is, the monetary unit is the most effective means of expressing to interested parties changes in capital and exchanges of goods and services.