Stable money measurement, Financial Management

Stable Money Measurement

A business entity enters within numerous transactions in which affect the business in varied ways.  Therefore recording, classification and summarization of these heterogeneous business transactions are measured and expressed in terms of general unit of measurement. For accounting reasons we suppose that money serves as a common denomination for expressing business transactions.  The implication of this concept is in which those transactions and events that might affect the business but are not measurable in money terms are not recorded in the books of account.

The second aspect of this concept is in which the money gives a standard of exchangeability and implicit assumption is in which the changes in purchasing power of the monetary unit are not of enough importance as to need adjustments. The application of the second aspect is in which all the assets in the balance sheet are recorded at their historical cost not at the current price. The changes in the purchasing power of monetary units are because of the inflation, but for accounting purpose it are ignored; therefore the concept is called as Stable Money Measurement Concept.

Posted Date: 2/6/2013 12:47:36 AM | Location : United States







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