MONETARY UNIT PRINCIPLE OF ACCOUNTING

ALL ABOUT ACCOUNTING :- 15th BLOG

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Hi freinds 🙏.,

           Today's discuss 10th accounting principle.

So let's discuss.,

  ★ MONETARY  UNIT :- 

The monetary unit principle states that business transactions should only be recorded if they can be expressed in terms of a currency. ... According to the monetary unit principle, when business transactions or events occur, they are first converted into money, and then recorded in the financial accounts of a business.

* The stable monetary  unit :-

            The stable monetary unit concept assumes that the value of the rupees is stable over time. This concept essentially allows accountants to disregard the effect of inflation -- a decrease, in terms of real goods, of what a rupees can purchase.

 * Importance of monetary unit

 assumption :-

            While the monetary unit assumption provides a stable basis upon which to value transactions, there are two important limitations: inflation and handling items which are difficult to quantify. ... The monetary unit assumption does not provide for differences in the value of a rupees due to the passage of time.

              Monetary unit assumption (also known as money measurement concept) states that only those events and transactions are recorded in books of accounts of the business which can be measured and expressed in monetary terms.

    

  * Monetary units :- 

monetary unit. Currency unit (such as the dollar, euro, peso, rupee) issued as a coin or banknote, and used as a standard unit of value and a unit of account. A monetary unit may be issued in several denominations which are multiples (such as $1, $5, $10, etc.) 

  * What is the effect of Inflation on Monetary Unit Assumption?

Ans :- Inflation has no effect on the assumption as this assumption does not take inflation into consideration. For example, if a piece of land is purchased in 1970 at $30,000, it will appear at the same cost of $30,000 even in 2019. This is because this assumption assumes that the monetary unit is stable in the long run.

 ★SHORT AND SWEET DEFINITION  OF MONETARY UNIT PRINCIPLE  :- 

All transection  should be reported in a common unit of   measurement (In India , this is a Indian rupees.  And in America,  this is a American dollar💲) 

This means that all financial  transactions  must be measured in monetary terms and not anything else. 

 

★Remaining 3 principles discuss in 16th blog..★

                                   

                                  ★So wait my 16th blog.....★

                   _____________________________

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