What is the Unit of Measure Concept?

The unit of measure concept is a standard convention used in accounting, under which all transactions must be consistently recorded using the same currency. For example, a business maintaining its records in the United States would record all of its transactions in U.S. dollars, while a German company would record all of its transactions in euros. If a transaction involves receipts or payments in a different currency, the amount is converted to the home currency used by an organization before being recorded. Without a common unit of measure, it would be impossible to produce financial statements.

Advantages of the Unit of Measure Concept

There are several key advantages of the unit measure concept that make it a cornerstone of modern accounting systems. They are as follows:

Comparable financial statements. By having organizations in the same countries report their results in the same currency, it is easier to compare their results and financial positions.
Standardization of transaction outcomes. By recording all transactions in one currency, it is easier to compare the outcomes of different transactions, which is useful for profitability analyses.