Assumption of monetary and non monetary activities
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The monetary unit assumption assumes that all business transactions and relationships can be expressed in terms of money or monetary units. Money is the common denominator in all economic activity and financial transactions. That is why we assume that money is a good basis for comparing companies and other accounting measurements. In other words, accounting looks at transactions that can be communicated in money or monetary units.
GAAP assumes that the monetary unit is stable, reliable, relevant, and useful to all companies. It is also universally available. All currencies are openly exchanged in world markets with varying exchange rates. Monetary units like the US dollar and English pound can be easily exchanged for the European Union Euro, Mexican peso, or the Japanese yen.
Currently the FASB does not recognize the affects of inflation in financial reporting. This is mainly because the US has enjoyed low inflationary rates for decades. If the US economy changes and the US inflation rates become hyperinflationary similar to countries like Brazil and South Africa, the FASB might change SFAC No. 5 which states that the US dollar is expected to be used for financial statements in the future.
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GAAP assumes that the monetary unit is stable, reliable, relevant, and useful to all companies. It is also universally available. All currencies are openly exchanged in world markets with varying exchange rates. Monetary units like the US dollar and English pound can be easily exchanged for the European Union Euro, Mexican peso, or the Japanese yen.
Currently the FASB does not recognize the affects of inflation in financial reporting. This is mainly because the US has enjoyed low inflationary rates for decades. If the US economy changes and the US inflation rates become hyperinflationary similar to countries like Brazil and South Africa, the FASB might change SFAC No. 5 which states that the US dollar is expected to be used for financial statements in the future.
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Answer:
Under, the economic activity various transaction took place some involves money exchanges on another side of the coin they don't.
Similarly, Monetary activities are the transaction of the business, Organization or house-hold in which money is the medium of exchange to obtain goods and services.
But, Non- Monetary activities are the transfers that include money but in return, they are not economical.
--->> Example of Monetary Activities -
• Purchasing of goods and services like clothes, footwear, books, etc.
• Payment made regarding services like transport, in a restaurant, etc.
--->> Example of Non- Monetary Activities -
• Donations and Charities to the Orphanage and Old-Age homes.
• Providing Gifts to the employee or relatives.
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