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

"Only monetary transactions are recorded" is the money measurement concept: accounting captures only facts expressible in money, giving all items a common, comparable unit.

Money measurement concept. Under this concept, only those transactions and events that can be measured and expressed in terms of money are recorded in the books of account. Money is used as the common measuring unit because it allows different items (cash, goods, machinery, wages) to be added and compared meaningfully.

Implications:

• Facts that cannot be expressed in money — such as the honesty of employees, efficiency of management, or good customer relations — are not recorded, even though they may greatly affect the business.
• Because everything is stated in money, records of different periods and firms become comparable. …