Which concept suggests the exclusion of human Resource in balance sheet?
Last updated May 15, 2026
Correct Answer:
Option B —
Money Measurement Concept
Why the Money Measurement Concept Excludes Human Resources
The Money Measurement Concept states that only those transactions and events that can be expressed in monetary terms should be recorded in the books of accounts.
The Limitation: Even though a highly skilled workforce (Human Resources) is the most valuable asset of a company, there is no universally accepted objective method to assign a specific financial value to a human being's skills, morale, or loyalty.
The Result: Because "intelligence" or "teamwork" cannot be accurately quantified in Rupees or Dollars, they are excluded from the Balance Sheet, despite their immense contribution to the business.
Breakdown of Other Concepts
A) Accounting Entity Concept: Treats the business and its owner as two separate legal entities.
C) Going Concern Concept: Assumes the business will continue to operate for the foreseeable future and has no intention of liquidating.
D) Cost Concept: States that assets should be recorded at their original purchase price (historical cost) rather than their current market value.
Answer verified by Quintessence Classes faculty — Karan Nagar, Srinagar.
