The monetary unit principle is the assumption that money itself is treated as a unit of measurement, and that all transactions or economic events recorded in the accounts of a business can be expressed and measured in monetary terms by a currency. Create invoices and manage your accounting online by using an easy invoicing program such as Debitoor. Sign up now! Isn’t it strange how “money” can be both a tangible and intangible good? You might go to the grocery store, and pay your bill with a physical £10 cash note. Whereas other times, you might be booking a flight ticket online, and pay for it via a credit card transfer - money
which you will never physically see. The similarity here is that money holds one strong characteristic - it has value. One of the generally accepted accounting principles is the monetary unit principle. The monetary unit principle states that business transactions should only be recorded if they can be expressed in terms of a currency. In other
words, anything that is non-quantifiable should not be recorded a business’ financial accounts. Over time, money has been adopted as a measurement unit in accounting. 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 monetary unit principle simply applies to the monetary expression of economic events, and business transactions. As an
accounting principle, the monetary unit ensures that everything which is recorded in the [financial statements](/dictionary/financial-statement of a business can be measured in monetary terms by currencies which are stable and reliable. As aforementioned, the monetary unit principle states that businesses should
only record transactions which can be expressed in monetary terms, such as the unit of currency. This therefore means that items which are non-quantifiable should be omitted from the accounts of a business. An example of non-quantifiable items include customer service quality, employee skill level, management expertise, employee motivation, time lost due to damages or reparation etc. For example: Consider you work in a company where twice a year the CEO gives a highly valued lecture to all employees about morale and motivation in your work environment. This lecture can not be recorded in your business financial accounts, because it can not be measured in terms of money. Monetary unit principle and currencyOne of the assumptions of the monetary unit principle is that the value of the unit of currency (in which you are working with) is stable. This means that in everyday use, the monetary unit allows accountants to treat financial accounts of a business which have been recorded from different financial periods, as if they were the same. This principle therefore does not consider the concept of inflation. For example: Imagine you purchase a building for £20 000 in 2010, and you record this amount in the accounts of your business. However, because of inflation, that same building is now worth £50 000 in 2018. You can not make the necessary adjustment in the accounts of your business for the difference in value, because of the monetary unit assumption. You are therefore forced to ignore the impact of inflation. Debitoor and accounting principlesThe monetary unit principle is one of the accounting principles which is universally recognised, as a communication of financial information. It is important that you comply with these principles when recording the financial activities of your business. It can often be useful to follow the guide of an invoicing software such as Debitoor to ensure that your accounting is efficient and in order. The personal assets of the owner of a company will not appear on the company's balance sheet because of which principle/guideline? Which principle/guideline requires a company's balance sheet to report its land at the amount the company paid to acquire the land, even if the land could be sold today at a significantly higher amount? Which principle/guideline allows a company to ignore the change in the purchasing power of the dollar over time? Which principle/guideline requires the company's financial statements to have footnotes containing information that is important to users of the financial statements? Which principle/guideline justifies a company violating an accounting principle because the amounts are immaterial? Which principle/guideline is associated with the assumption that the company will continue on long enough to carry out its objectives and commitments? A very large corporation's financial statements have the dollar amounts rounded to the nearest $1,000. Which accounting principle/guideline justifies not reporting the amounts to the penny? Accountants might recognize losses but not gains in certain situations. For example, the company might write-down the cost of inventory, but will not write-up the cost of inventory. Which principle/guideline is associated with this action? Which principle/guideline directs a company to show all the expenses related to its revenues of a specified period even if the expenses were not paid in that period? When the accountant has to choose between two acceptable alternatives, the accountant should select the alternative that will report less profit, less asset amount, or a greater liability amount. This is based upon which principle/guideline? Public utilities' balance sheets list the plant assets before the current assets. This is acceptable under which accounting principle/guideline? A large company purchases a $250 digital camera and expenses it immediately instead of recording it as an asset and depreciating it over its useful life. This practice may be acceptable because of which principle/guideline? A corporation pays its annual property tax bill of approximately $12,000 in one payment each December 28. During the year, the corporation's monthly income statements report Property Tax Expense of $1,000. This is an example of which accounting principle/guideline? A company sold merchandise of $8,000 to a customer in December. The company's sales terms require the customer to pay the company in 30 days. The company's income statement reported the sale in December. This is proper under which accounting principle/guideline? Accrual accounting is based on this principle/guideline. The creative chief executive of a corporation who is personally responsible for numerous inventions and innovations is not reported as an asset on the corporation's balance sheet. The accounting principle/guideline that prevents the corporation for reporting this person as an asset is An asset with a cost of $120,000 is depreciated over its useful life of 10 years rather than expensing the entire amount when it is purchased. This complies with which principle/guideline? Near the end of the current year, a company required a customer to pay $200,000 as a deposit for work that is to begin in the following year. At the end of the current year the company reported the $200,000 as a liability on its balance sheet. Which accounting principle/guideline prevented the company from reporting the $200,000 on its income statement for the current year? A retailer wishes to report its merchandise inventory on its balance sheet at its retail value. This would violate which accounting principle/guideline? A company borrowed $100,000 in December and will make its only payment for interest when the note comes due six months later. The total interest for the six months will be $3,600. On the December income statement the accountant reported Interest Expense of $600. This action was the result of which accounting principle/guideline? Want more practice questions? Which of the following states that a transaction is not recorded in the book of accounts unless it is measurable in terms of money Mcq?The money measurement concept states that a business should only record an accounting transaction if it can be expressed in terms of money.
Which states that a transaction is not recorded in the books of accounts unless it is measurable in terms of money?The monetary unit principle states that business transactions should only be recorded if they can be expressed in terms of a currency. In other words, anything that is non-quantifiable should not be recorded a business' financial accounts.
Which accounting concept or principle states that the transactions of a business must be recorded separately from those of its owners or other businesses Mcq?This concept is called business entity concept. It means that personal transactions of owners are treated separately from those of the business. Therefore any personal expenses incurred by owners of a business will not appear in the income statement of the entity. Was this answer helpful?
Which accounting concept recognizes that in accounting all transactions are expressed and interpreted in terms of money?2.2. 2 Money Measurement Concept The concept of money measurement states that only those transactions and happenings in an organisation which can be expressed in terms of money such as sale of goods or payment of expenses or receipt of income, etc., are to be recorded in the book of accounts.
|
Which of the following states that a transaction is not recorded in the books of accounts unless it is measurable in the terms of money?
zusammenhängende Posts
Urheberrechte © © 2024 toptenid.com Inc.
