What is Accounting Measurement
Accounting measurement is the computation of economic or financial activities in terms of money, hours or other units. An accounting measurement is a unit of some measurable element that is used to compare and evaluate accounting data.
Accounting is often measured in terms of money. For example, when a company records weekly sales at $10,000, the same company could record those transactions in terms of units sold; for instance 5,000 units (of $2.00 products).
BREAKING DOWN Accounting Measurement
Accounting is often quantified in terms of money but can also be recorded in terms of alternative units, number of labor hours, number of jobs created, etc. Different accounting measurements provide different views of the overall health of the corporation. By using a variety of different accounting measurements, a person can gain a more comprehensive view of a company's operations and more easily compare them with those of other companies.
Example of Accounting Measurement
Two companies may have weekly sales of $10,000, but Company A may achieve this with two salespeople and Company B may achieve it with 10. In this case, Company A's sales team is much more productive, bringing in $5,000 per salesperson per week versus only $1,000 per salesperson per week for Company B.
On the other hand, if Company A has a total of 200 employees, and Company B has a total of 100, then Company A is achieving only $50 per employee ($10,000/200 and Company B is achieving $100 per employee ($10,000/100). This might suggest that Company A has too much administrative overhead or that Company B runs a very efficient operation.