Q.Why does the Money Measurement Concept ignore facts such as the skill of a firm's employees or a pending labour strike, even though these clearly affect the business?

This concept draws a hard line around what accounting can and cannot record, based purely on whether a fact can be objectively expressed in rupees.

The Money Measurement Concept states that only transactions and events capable of being expressed in terms of money are recorded in the books of account. The skill or morale of employees, the loyalty of customers, or the likelihood of a labour strike may genuinely affect a business's future profitability — but none of them can be measured in rupees objectively; any rupee figure assigned to "employee skill" would simply be someone's opinion, not a verifiable fact.

Accounting deliberately restricts itself to what can be measured reliably and objectively, because the moment subjective, unverifiable figures are allowed into the books, the reliability and comparability of financial statements — the entire point of GAAP — breaks down. This is a genuine, acknowledged limitation of accounting (also covered in Chapter 1): financial statements never give the complete picture of a business, only its monetary picture.

Arguing that these facts 'should' be recorded because they matter — the concept is not about importance, it is about objective, reliable measurability in money terms.