Objective Of Accounting Measurement In Accounting

Introduction

People usually thought that accounting is reckoned in terms of money. However, accounting can also be recorded in terms of the number of labour hours, alternative units and others. The objective of accounting measurement is to give a better insight on the status of the organisation by permitting different ways of evaluation and judgement. It has always been an issue as there is no specific indication to show that a measurement is ideal to apply. Thus, it is frequent that in every situation an accountant may encounter with an option of several measurements.

Discussion

A number of accounting measurements can be utilised by accountants to the distinctive components in the accounting records. The purpose of each measurement is to

This is the reason why it requires certain accounting transaction to be measured at its historical costs. Historical cost can be defined as a degree of value utilised in accounting in which the cost of an asset is based on the original price when the asset is obtained by the organisation. For instance, 200 units of an item were bought two months back that cost $10 per unit. However, the current price is $12 per unit. Hence, the inventory will show at a cost of $2000 instead of $2400 on balance sheet. The advantage of employing historical cost is because it can be accepted by most of accountants due to its nature as it is supported by transactions that have been completed and it is easily understandable to its users (Diana,

It is the measurement that indicates the costs should be paid for an asset, the date of the use, its use at the date of the balance sheet or sale if the asset is not yet owned. In example, the current acquisition cost of an entity or the current cost to create an entity will be used as the current cost of an entity (e.g. inventories). Thus, the current (replacement) cost is more accurate in order to value an asset instead of using the original cost paid for the asset. The benefit of employing current cost is it provides more reliable measure of efficiency of the organisation. Besides, it splits the profit of an asset into that part which from keeping the asset before it is sold. This division shows the outcomes of asset management decisions and the impact on transactions. Moreover, the different reporting of holding gains allow users of financial statements to have a deeper insight on the organisation’s operating performance. However, Abu Bakar and Mohd Said (2007) states that current cost tends to be subjective as it is hard to find the precise current