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Question
The retirement of manager of the company cannot be recorded in the book of accounts, because it is not possible to estimate the financial effect of retirement. Which accounting principle would be applicable for the above statement?
Options
The Going Concern Concept
The Business Entity Concept
Money Measurement Concept
The Dual Aspect Concept
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Solution
Money Measurement Concept
Explanation:
The Money Measurement Concept states that only transactions and occurrences that may be stated or quantified in monetary terms should be documented in the books of accounts. Even while the retirement of a highly talented manager is a big event that can have a profound impact on a company’s operations, it is a qualitative change whose financial impact cannot be objectively and accurately measured; hence, it must be completely removed from accounting records.
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