Accounting measurement definition

What is Accounting Measurement?

Accounting measurement is the aggregation of numeric information, typically in terms of a unit of currency. For example, the sales in a reporting period may be expressed in dollars of revenue. It is also possible to use some other unit of measure, such as hours of employee time or hours of machine time.  For example, employees spend 120 hours working on a consulting project. By using a standardized accounting measurement, it is easier to compare results over a period of time. Financial accounting involves the use of monetary units of currency, since the outcome of this accounting is the production of a set of financial statements. Management accounting is more likely to use non-monetary units of measure, since it is more concerned with operational metrics.

Accounting measurements are recorded in the accounting system, which stores the results of all business transactions in which an organization engages.

Example of Accounting Measurement

Entry Consulting Ltd. is a professional services firm that tracks both financial and operational performance. For its financial statements, the company uses accounting measurement in terms of currency—specifically U.S. dollars. During the fourth quarter, Entry earned $500,000 in revenue by billing clients for consulting services. This amount is measured and reported in dollars on the income statement, reflecting the value of services rendered. The firm also records $350,000 in expenses, including salaries, rent, and software subscriptions, resulting in a net income of $150,000 for the period. These values are all measured using the monetary unit, a standard method in financial accounting.

In addition to currency-based measurement, Entry also applies non-monetary accounting measurement for internal management purposes. For example, the company tracks consulting hours billed, recording that consultants worked a total of 4,000 hours during the quarter. This non-financial metric allows the company to assess employee productivity and client utilization rates. It may also calculate revenue per hour, which in this case equals $125 per hour ($500,000 ÷ 4,000 hours).

This example illustrates how accounting measurement can use both monetary and non-monetary units to quantify business activities, supporting both external financial reporting and internal decision-making.