Measurement of Accounting | Level Of Measurement | Measurement

# 2.

0 Measurement Of Accounting
2.1 Nature Of measurement in Accounting
It is generally considered that accounting is a measurement as well as a communication discipline. By measurement is meant “the assignment of numerals to objects or events according to rules”. The first step in accounting is to identify & select these objects, activities or events and their attributes that are deemed relevant to users before actual measurement takes place. Naturally, limitations of availability of data as well as specific characteristics of the environment, like uncertainty, lack of objectivity & verifiability, may create constraints to measurement. Notwithstanding these constraints, measurement in accounting traditionally involves the assignment of numerical values to objects, events or their attributes in such a way as to insure easy aggregation or disaggregation of the data. Where measurement is inadequate or infeasible, no quantifiable or no monetary information may be provided in the footnotes.

The unit cost of production that is derived by dividing the total production by the volume of production is an indirect or secondary measure.2. accounting measures can be classified as a past measure. a measurement error would occur either in (a) the original primary quantification or. These objects or attributes are the intrinsic objects of an indirect measure. 2.2 Types of measures Various types of measures are possible in accounting: 1. Accounting measurement can be either direct or indirect. It is the degree of transformation that provides the distinction between what is perceived as a direct or an indirect measure & defines the source of the measurement error. Direct or primary measures are actual measures of an object or its attributes. (b) the transformation process. Thus. Indirect or secondary measures are derived indirectly by an algebraic transformation of a set of numbers that themselves represent direct measures of some objects or attributes. . a present measure or a future measure to refer respectively to a measure of a measure of future event. With respect to decision time dimension. Most measures used in accounting are indirect measures resulting from some transformation.

5. present or future event relative to the time at which measurement is made. (b) Two kinds of present measures: contemporary present measures & prospective present measures. a contemporary measure. To refer to whether the accounting object or its attributes measures belong to a past. the accounting measures can be classified as a retrospective measure. or a prospective measure. (c) All future measures to be prospective. (b) Derived measurements which rely on the measurement of two or more quantities & depend on the existence of a verified empirical theory linking the given property to other properties. Measurements can be either (a) made when confirmed empirical theories may be used to support . This makes it possible to have: (a) Three kinds of past measures: retrospective past measures. contemporary past measures or a prospective measures.3. Measurements can be either: (a) Fundamental measurements where the number can be assigned to the property by reference to natural laws & do not rely on the measurement of any other variables. 4.

Mattessich states: “ [Measurement by flat] is the least desirable since it depends greatly in the intuition of the experimenter & offers frequently too large a number of definitional possibilities or alternatives. which is reflected an a certain definitional arbitrariness of our discipline. by fundamental measurement) nor through a combination of two or more fundamental measures that result in derived measurement. by the potential of its liquidation yield or many other variations & confirmations. by its discounted expected net revenues. although a scientific approach to accounting theory construction & verification attempts to provide the necessary empirical testing & thereby reduce and eliminate some of the arbitrariness in definition & measurement of accounting concepts.e. or (b) made by flat. We might measure the value of an asset by its purchase price (historic cost basis). There neither exists at present the possibilities to infer accounting values through “natural laws” (i. Most of the economic & accounting measures belong in the category of measurement by fiat.” .their existence.

3 Types Of Scales Every measurement is made on a scale. with the additional features of the existence of a unique origin. One problem with the ordinal scale is that the difference or intervals between the numbers are not necessarily equal. a natural zero point.2. interval or ratio. It assigns equal values to intervals between assigned numbers. Accounting relies on each of the scale of measurements: The nominal scale although basic to the accounting process is neither the only nor the most impartment scale . It is an order of preference system. where the distance from it for at least one object is known. like the numbering of footballers. Scales can be described in general terms as nominal. An interval scale assists in the determination of the equality of intervals or differences like temperature & time. ordinal. rather than their properties.] A ratio scale assists in the determination of the equality of ratios. The numbers reflect the objects themselves. like grades of wool or street numbers. A nominal scale assists in the determination of equality. An ordinal scale assists in the determination of greater or lesser. It is a simple classification of labeling system like the case of a chart of accounts.

statement analysts primarily work with ordinal scales. The evaluation process.utilizes the ratio scale.the core of theoretical accountancy. .pertaining to our discipline. and certain aspects of cost accounting can be considered as applying the interval scale.

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