Q.'Only monetary transactions are recorded in accounting'. Explain the statement.

The statement expresses the money measurement concept — accounting records only what can be measured in money, so useful non-monetary facts are left out.

Explanation of the statement: According to the money measurement concept, only those transactions and events which can be expressed in terms of money are recorded in the books of accounts. Money is used as the common unit of measurement so that different items (a building, cash, goods, machinery) can be added together and compared.

Implications:

• Every transaction recorded must have a money value; a transaction that cannot be measured in money is not entered.
• Because money is the common measuring unit, heterogeneous assets can be totalled — e.g. ₹1,00,000 cash + ₹40,000 stock + ₹10,000 furniture can be added to a meaningful total. …