CA Foundation · Accounting · Theoretical Framework
Anita Textiles records only those transactions that can be expressed in rupees. The skill and loyalty of its workforce, although valuable, find no place in the books. Which accounting concept is being applied?
The money measurement concept is being applied. Accounting records only those events that can be expressed in monetary terms, so the skill and loyalty of employees, being incapable of reliable measurement in rupees, are left out of the books of Anita Textiles.
- AMoney measurement conceptCorrect
- BGoing concern concept
- CDual aspect concept
- DAccrual concept
Explanation
Under the money measurement concept, only transactions and events that can be measured in monetary terms are recorded. Employee skill and loyalty cannot be reliably expressed in rupees, so they are not recorded. The going concern concept relates to continuity of the business, not to measurability.
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