monetary unit assumption

(noun)

the business should have one dollar (or corresponding currency) to record its transactions

Related Terms

Examples of monetary unit assumption in the following topics:

  • Introduction to IFRS

    • Financial capital maintenance in nominal monetary units, i.e., globally implemented Historical cost accounting during low inflation and deflation only under the traditional Historical Cost paradigm
    • Financial capital maintenance in units of constant purchasing power, i.e., Constant Item Purchasing Power Accounting – CIPPA – in terms of a Daily Consumer Price Index or daily rate at all levels of inflation and deflation under the Capital Maintenance in Units of Constant Purchasing Power paradigm and Constant Purchasing Power Accounting – CPPA – during hyperinflation under the Historical Cost paradigm.
    • Going concern: for the foreseeable future an entity will continue under the Historical Cost paradigm as well as under the Capital Maintenance in Units of Constant Purchasing Power paradigm
    • Stable measuring unit assumption: financial capital maintenance in nominal monetary units or traditional Historical cost accounting only under the traditional Historical Cost paradigm.
    • Units of constant purchasing power: capital maintenance in units of constant purchasing power at all levels of inflation and deflation in terms of a Daily Consumer Price Index or daily rate only under the Capital Maintenance in Units of Constant Purchasing Power paradigm.

  • Reporting of Financial Statement Analysis

    • To achieve these basic objectives and implement fundamental qualities, GAAP has four basic assumptions, four basic principles, and four basic constraints.
    • Only when liquidation is certain is this assumption not applicable.
    • Monetary Unit principle: assumes a stable currency is going to be the unit of record.
    • The FASB accepts the nominal value of the US Dollar as the monetary unit of record, unadjusted for inflation.

  • Introduction to GAAP

    • In cases when liquidation is certain, this assumption is not applicable.
    • Monetary Unit Principle: assumes a stable currency is going to be the unit of record.
    • The FASB accepts the nominal value of the US Dollar as the monetary unit of record unadjusted for inflation.
    • Differentiate between GAAP constraints, assumptions and principles, and the role they play in the preparation of financial statements

  • ANOVA Assumptions

    • Kempthorne and his students make an assumption of unit-treatment additivity.
    • In its simplest form, the assumption of unit-treatment additivity states that the observed response from the experimental unit when receiving treatment can be written as the sum of the unit's response $y_i$ and the treatment-effect $t_j$, or
    • The assumption of unit-treatment additivity implies that for every treatment $j$, the $j$th treatment has exactly the same effect $t_j$ on every experiment unit.
    • The assumption of unit-treatment additivity usually cannot be directly falsified; however, many consequences of unit-treatment additivity can be falsified.
    • List the assumptions made in a one-way ANOVA and understand the implications of unit-treatment additivity

  • Classical Theory

    • The primary economic question involved how a society could be organized around a system in which every individual sought his own monetary gain.
    • It was not possible for a society to grow as a unit unless its members were committed to working together.

  • Limitations of Monetary Policy

    • Monetary policy is the process by which the monetary authority of a country controls the supply of money with the purpose of promoting stable employment, prices, and economic growth.
    • Monetary policy can influence an economy but it cannot control it directly.
    • There are limits as to what monetary policy can accomplish.
    • The velocity of money is the frequency at which one unit of currency is used to purchase domestically-produced goods and services within a given time period.
    • In other words, it is the number of times one dollar is spent to buy goods and services per unit of time.

  • The Importance of Productivity

    • Productivity is the ratio of total output to one unit of total input; high productivity means larger capital gains.
    • Productivity is measured as a total output per one unit of a total input.
    • Real process and production process are often seen as focal points in efficiency, but monetary concerns and market value are also very important.
    • The price of coffee beans in dollars is therefore an enormous monetary risk for the company because resource scarcity could raise its expenses exponentially.
    • Monetary and market value processes - Monetary process refers to financing a business and the inputs of production.

  • Real Versus Nominal Rates

    • A nominal value is an economic value expressed in monetary terms (that is, in units of a currency).
    • It is the ratio of the number of units of a given country's currency necessary to buy a market basket of goods in the other country, after acquiring the other country's currency in the foreign exchange market, to the number of units of the given country's currency that would be necessary to buy that market basket directly in the given country.
    • However, since these assumptions are almost never met in the real world, the real exchange rate will never equal 1.

  • Cost

    • The opportunity costs associated with any activity may be explicit, out of pocket, expenditures made in monetary units or implicit costs that involve sacrifice that is not measured in monetary terms.
    • It is often the job of economists and accountants to estimate implicit costs and express them in monetary terms.
    • Accountants assume the expected life of the asset and a path (straight line, sum of year's digits, double declining, etc) to calculate a monetary value.

  • The Functions of Money

    • The monetary economy is a significant improvement over the barter system, in which goods were exchanged directly for other goods.
    • It is usually bilateral, though it can be multilateral, and usually exists parallel to monetary systems in most developed countries, though to a very limited extent.
    • Absence of common measure of value: In a monetary economy, money plays the role of a measure of value of all goods, making it possible to measure the values of goods against each other.
    • It can replace money as the method of exchange in times of monetary crisis, such as when a the currency is either unstable (e.g. hyperinflation or deflationary spiral) or simply unavailable for conducting commerce.
    • A unit of account: a means of keeping track of how much something is worth.