Which concept suggests the exclusion of human Resource in balance sheet?

Question

Which concept suggests the exclusion of human Resource in balance sheet?

1. A. Account Concept
2. B. Money Measurement Concept (Correct answer)
3. C. Going Concern Concept
4. D. Cost Concept

Correct Answer

Option B — Money Measurement Concept

Detailed Solution & Explanation

The correct answer is Money Measurement Concept.

Key Points

• The Money Measurement Concept states that only transactions expressible in monetary terms are recorded.
• Human resources, while valuable, cannot be objectively measured in money, so they are excluded from the balance sheet.

Additional Information

• The money measurement concept records only what can be expressed in money, which is why staff skill, morale and customer loyalty never appear on a balance sheet.
• It also assumes money holds a stable value, an assumption inflation undermines — the criticism that gave rise to inflation accounting.
• The related conventions: business entity (owner separate from firm), going concern, cost concept, dual aspect, accrual, matching, conservatism, consistency and materiality.
• Human resource accounting exists precisely as an attempt to work round this limitation, but it is not part of mainstream financial statements.