BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the company will have a long life
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the company can divide its economic activities into artificial time periods
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the common denominator of economic activity and provides an appropriate basis for accounting measurement and analysis
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economic activity can be identified with a particular unit of accountability
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Detailed explanation-1: -The monetary unit assumption means that money is the common denominator of economic activity and provides an appropriate basis for accounting measurement and analysis. That is, the monetary unit is the most effective means of expressing to interested parties changes in capital and exchanges of goods and services.
Detailed explanation-2: -Monetary unit assumption states that only transactions which can be measured in monetary terms are recorded in a company’s books of accounts. If a transaction cannot be expressed in dollar value, it should not be included in the company’s financial books.
Detailed explanation-3: -The monetary unit assumption means that money is the common denominator for economic activity and provides an appropriate basis for accounting measurements and analysis.
Detailed explanation-4: -The common denominator chosen in accounting is the monetary unit. Money is the common denominator in terms of which the exchangeability of goods and services, including labour, natural resources and capital, are measured.
Detailed explanation-5: -The monetary unit principle states that you only record business transactions that can be expressed in terms of a currency. Thus, a company cannot record such non-quantifiable items as employee skill levels, the quality of customer service, or the ingenuity of the engineering staff.