The monetary concept refers to:recognising only cash transactions in the financial statements.measuring all items in the financial statements in monetary terms.recognising cash in the financial statements.recognising all items in the financial statements even if they cannot be measured in monetary terms.
Question
The monetary concept refers to:recognising only cash transactions in the financial statements.measuring all items in the financial statements in monetary terms.recognising cash in the financial statements.recognising all items in the financial statements even if they cannot be measured in monetary terms.
Solution
The monetary concept in accounting refers to measuring all items in the financial statements in monetary terms. This means that all transactions and events are expressed in terms of money and recorded in the financial statements accordingly. This concept is based on the assumption that the unit of measure (i.e., the currency) is stable, which allows for meaningful comparisons over time.
It does not mean recognizing only cash transactions or recognizing all items even if they cannot be measured in monetary terms. While cash transactions are certainly included, non-cash transactions that can be reliably measured in monetary terms are also recognized. On the other hand, items that cannot be measured in monetary terms, such as the value of human resources or customer loyalty, are typically not recognized in the financial statements.
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