Question

Money-measurement concept of accounting theory is based on the assumption that the value of money will be _____________.

• A. remain constant
• B. fluctuate
• C. decrease
• D. none of the above

Answer 1

Answer: (A)

remain constant

The Money-measurement concept states that only those transactions shall be recorded in the books of accounts which can be measured in monetary terms. Therefore, non-monetary transactions shall not be recorded in the books of accounts, for example, the death of the key manager.
Under this concept the effect of inflation is not considered, therefore the value of money will remain constant.