what is money measurement concept

The money measurement concept is an accounting principle that states that every recorded event or transaction is measured in terms of money, the local currency monetary unit of measure. This means that a business should only record an accounting transaction if it can be expressed in terms of money. 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 companys 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, and value of an in-house brand. The money measurement concept has some limitations, as it does not account for qualitative factors such as the skill level of a companys workforce, customer satisfaction, market reputation, etc., which can also significantly impact a companys performance and value. Similarly, it does not consider the effects of inflation, which can distort the value of money over time.