1. Identification of Financial Transactions and EventsAccounting records only those transactions and events which can be measured in terms of money) This involves identifying transactions and events that are part of economic activity, for example, purchase of raw material or sale of finished goods by a firm.Visualise the individual entering the living room, where they see a huge price tag on the sofa (economic activity).Accounts सिर्फ वही Transaction record करता है, जो Money term में Measure किया जा सके , जब तक Economic Activity नहीं होती,तब तक Accounting Start नहीं होती.2. Measuring the Identified TransactionsFinancial transactions and events are measured in terms of money. An event which cannot be measured in terms of money is not recorded in the books of account. For example, events like the calibre or quality of the management team or appointment of a manager are not recorded in the books of account.Picture the individual placing a stack of money on a scale to measure it on the coffee table (money measurement).Financial Transactions money term में होते हैं, अगर कोई Event Money term में,नहीं बताया जा सकता तो उसके अकाउंटिंग नहीं होगी.