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The unit of account in financial accounting refers to the words used to describe the specific assets and liabilities that are reported in financial statements rather than the units used to measure them. That is, unit of account refers to the object of recognition or display whereas unit of measure refers to the tool for measuring it. [9]
A unit of measurement that applies to money is called a unit of account in economics and unit of measure in accounting. [5] This is normally a currency issued by a country or a fraction thereof; for instance, the US dollar and US cent (1 ⁄ 100 of a dollar), or the euro and euro cent.
The money measurement concept (also called monetary measurement concept) underlines the fact that in accounting and economics generally, every recorded event or transaction is measured in terms of money, the local currency monetary unit of measure. Using this principle, a fact or a happening or event which cannot be expressed in terms of money ...
A unit of account (in economics) [25] is a standard numerical monetary unit of measurement of the market value of goods, services, and other transactions. Also known as a "measure" or "standard" of relative worth and deferred payment, a unit of account is a necessary prerequisite for the formulation of commercial agreements that involve debt.
The unit of measure in accounting shall be the base money unit of the most relevant currency. This principle also assumes the unit of measure is stable; that is, changes in its general purchasing power are not considered sufficiently important to require adjustments to the basic financial statements." [10]
The stable measuring unit assumption (traditional Historical Cost Accounting) during annual inflation of 26% for 3 years in a row would erode 100% of the real value of all constant real value non-monetary items not maintained under the Historical Cost paradigm. B. Under Constant Purchasing Power Accounting the underlying assumptions in IFRS are:
Economics, business, accounting, and related fields often distinguish between quantities that are stocks and those that are flows. These differ in their units of measurement. A stock is measured at one specific time, and represents a quantity existing at that point in time (say, December 31, 2004), which may have accumulated in the past.
A daily indexed unit of account or Daily Consumer Price Index (Daily CPI) can be used in contracts or in the Capital Maintenance in Units of Constant Purchasing Power accounting model, to ensure that deferred payments and constant real value non-monetary items are indexed to the general price level in terms of a Daily Index.