CA Foundation · Accounting · Theoretical Framework
Which of the following is an example of a transaction that is NOT recorded in the books of a business, because of the money measurement concept?
The skill and loyalty of the workforce is not recorded. Under the money measurement concept, only events that can be measured in monetary terms are entered in the books, whereas furniture purchases, salary payments and commission receipts all have clear rupee values.
- APurchase of furniture on credit
- BPayment of salaries to staff
- CSkill and loyalty of the workforce of the firmCorrect
- DReceipt of commission from a customer
Explanation
The money measurement concept allows only transactions that can be expressed in money to be recorded. The skill and loyalty of employees cannot be reliably measured in rupees, so they are not recorded. The other three are monetary events and are recorded.
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