monetary measurement convention

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The accounting convention that transactions are only recognized in financial statements if they can be measured in monetary terms. This means that some assets, such as a highly trained workforce or a sound customer base, will not be shown. It is also assumed, when preparing current statutory accounts, that money is a stable unit of measurement; in times of price changes, therefore, financial statements can be misleading. This is a major disadvantage of historical-cost accounting.

Subjects: Accounting.

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