2.

0 Measurement Of Accounting
2.1 Nature Of measurement in Accounting
It is generally considered that accounting is a measurement as well as a communication discipline. By measurement is meant the assignment of numerals to objects or events according to rules. The first step in accounting is to identify & select these objects, activities or events and their attributes that are deemed relevant to users before actual measurement takes place. Naturally, limitations of availability of data as well as specific characteristics of the environment, like uncertainty, lack of objectivity & verifiability, may create constraints to measurement. Notwithstanding these constraints, measurement in accounting traditionally involves the assignment of numerical values to objects, events or their attributes in such a way as to insure easy aggregation or disaggregation of the data. Where measurement is inadequate or infeasible, no quantifiable or no monetary information may be provided in the footnotes.

2.2 Types of measures

Various types of measures are possible in accounting:
1.

Accounting measurement can be either direct or indirect. Direct or primary measures are actual measures of an object or its attributes. Indirect or secondary measures are derived indirectly by an algebraic transformation of a set of numbers that themselves represent direct measures of some objects or attributes. These objects or attributes are the intrinsic objects of an indirect measure. The unit cost of production that is derived by dividing the total production by the volume of production is an indirect or secondary measure. Most measures used in accounting are indirect measures resulting from some transformation. It is the degree of transformation that provides the distinction between what is perceived as a direct or an indirect measure & defines the source of the measurement error. Thus, a measurement error would occur either in (a) the original primary quantification or, (b) the transformation process.

2. With respect to decision time dimension, accounting measures can be classified as a past measure, a present measure or a future measure to refer respectively to a measure of a measure of future event.

3.

To refer to whether the accounting object or its attributes measures belong to a past, present or future event relative to the time at which measurement is made, the accounting measures can be classified as a retrospective measure, a contemporary measure, or a prospective measure. This makes it possible to have: (a) Three kinds of past measures: retrospective past measures, contemporary past measures or a prospective measures. (b) Two kinds of present measures: contemporary present measures & prospective present measures. (c) All future measures to be prospective.

4. Measurements can be either: (a) Fundamental measurements where the number can be assigned to the property by reference to natural laws & do not rely on the measurement of any other variables. (b) Derived measurements which rely on the measurement of two or more quantities & depend on the existence of a verified empirical theory linking the given property to other properties. 5. Measurements can be either (a) made when confirmed empirical theories may be used to support

their existence; or (b) made by flat, although a scientific approach to accounting theory construction & verification attempts to provide the necessary empirical testing & thereby reduce and eliminate some of the arbitrariness in definition & measurement of accounting concepts. Mattessich states: [Measurement by flat] is the least desirable since it depends greatly in the intuition of the experimenter & offers frequently too large a number of definitional possibilities or alternatives. We might measure the value of an asset by its purchase price (historic cost basis), by its discounted expected net revenues, by the potential of its liquidation yield or many other variations & confirmations. There neither exists at present the possibilities to infer accounting values through natural laws (i.e. by fundamental measurement) nor through a combination of two or more fundamental measures that result in derived measurement. Most of the economic & accounting measures belong in the category of measurement by fiat, which is reflected an a certain definitional arbitrariness of our discipline.

2.3 Types Of Scales

Every measurement is made on a scale. Scales can be described in general terms as nominal, ordinal, interval or ratio. A nominal scale assists in the determination of equality, like the numbering of footballers. It is a simple classification of labeling system like the case of a chart of accounts. The numbers reflect the objects themselves, rather than their properties. An ordinal scale assists in the determination of greater or lesser, like grades of wool or street numbers. It is an order of preference system. One problem with the ordinal scale is that the difference or intervals between the numbers are not necessarily equal. An interval scale assists in the determination of the equality of intervals or differences like temperature & time. It assigns equal values to intervals between assigned numbers.] A ratio scale assists in the determination of the equality of ratios, with the additional features of the existence of a unique origin, a natural zero point, where the distance from it for at least one object is known. Accounting relies on each of the scale of measurements: The nominal scale although basic to the accounting process is neither the only nor the most impartment scale

pertaining to our discipline. The evaluation process- the core of theoretical accountancy- utilizes the ratio scale; statement analysts primarily work with ordinal scales; and certain aspects of cost accounting can be considered as applying the interval scale.