Introduction to Accounting Concepts: Money Measurement and Cost Concepts

The video tutorial discusses Peter's business activities in July, focusing on accounting principles. It covers the money measurement concept, which states that only quantifiable events can be recorded in accounting books, and the cost concept, which emphasizes recording transactions at their cost price rather than market value. Examples include purchases, sales, insurance, and asset acquisition. The tutorial concludes with a summary of these concepts.

What is the primary focus of the money measurement concept in accounting?

• Recording future market predictions

• Recording emotional states of the business owner

• Recording only those events that can be quantified in monetary terms

• Recording all business events, regardless of their nature

Which of the following events would NOT be recorded in accounting books according to the money measurement concept?

• Payment of insurance premium

• Owner's happiness about business growth

• Sale of goods on credit

• Purchase of goods worth $500

According to the cost concept, at what price should Peter record the insurance policy he purchased?

• $2,000, the price he paid

• $3,500, the market price

• $1,500, the difference between market and paid price

• $0, as it was a gift

If Peter receives a piece of furniture valued at $1,000 but pays $500, what amount should be recorded according to the cost concept?

• $500, the amount paid

• $1,000, the market value

• $750, the average of market and paid price

• $0, as it was a gift

How should Peter record the mobile phone purchase if the market price drops after his purchase?

• Record at the new market price of $120

• Record at the original purchase price of $200

• Record at an average of the two prices

• Do not record as the price changed