Question

The measurement principle prescribes that accounting information is based on subjective opinion rather than cost.

True or false?

Answer 1

False. Measurement principle or money measurement principle in accounting means that only those transactions or events should be recorded which can be measured in terms of money. Thus contrary to the given statement accounting information is not based on subjective opinion but on actual cost. For example:

Sale of goods for $100 is a transaction which can be measured in money terms and expressed as denoting that goods were sold for $100. Here, it is a measured fact rather than an opinion that goods were indeed sold for $100.