Monetary Item

AAA

DEFINITION of 'Monetary Item'

An asset or liability carrying a value in dollars that will not change in the future. These items have a fixed numerical value in dollars, and a dollar is always worth a dollar. The numbers don't change even though the purchasing power of a dollar does. The distinction is easy to see when contrasted against a non-monetary item like a factory. A factory will see its value - its price represented as a number of dollars - fluctuate over time like any other physical property. It may lose value over the years as it becomes outdated. Or it may gain value as a city grows up around it. So a company may record a factory as being worth $500,000 one year and $480,000 the next, whereas the same $100,000 in cash will be recorded as $100,000 every year.

BREAKING DOWN 'Monetary Item'

Monetary items are simply cash, whether a debt owed by a company, a debt owed to it or a pile of cash in its account. For example, a company owes $40,000 to a supplier for goods delivered. That line item is recorded at $40,000 even though, when the company pays the bill three months later, the cost of those same goods has increased $3,000 because of inflation. Similarly, if the company holds $200,000 in cash, that $200,000 is considered a monetary item and is recorded as $200,000 even though, four years later, it may only buy $180,000 worth of goods compared to when it was first put into an account.

RELATED TERMS
  1. Inflation

    The rate at which the general level of prices for goods and services ...
  2. Nonmonetary Assets

    Assets in which the right to receive a fixed or determinable ...
  3. Nonmonetary Transaction

    Transactions that do not result in a transfer of funds between ...
  4. Consumer Price Index - CPI

    A measure that examines the weighted average of prices of a basket ...
  5. Deflation

    A general decline in prices, often caused by a reduction in the ...
  6. Federal Reserve System - FRS

    The central bank of the United States. The Fed, as it is commonly ...
Related Articles
  1. Bonds & Fixed Income

    Coping With Inflation Risk

    Inflation is less dramatic than a crash, but it can be more devastating to your portfolio.
  2. Economics

    What Is Fiscal Policy?

    Learn how governments adjust taxes and spending to moderate the economy.
  3. Economics

    What You Should Know About Inflation

    Find out how this figure relates to your investment portfolio.
  4. Forex Education

    The History Of Money: Currency Wars

    Find out how conflicts have changed the role money plays in our lives.
  5. Economics

    The Great Inflation Of The 1970s

    Political moves meant prevent unemployment served to do the opposite, creating one of the worst fiscal disasters of the century.
  6. Investing

    How To Calculate Minority Interest

    Minority interest calculations require the use of minority shareholders’ percentage ownership of a subsidiary, after controlling interest is acquired.
  7. Economics

    A Look at Greece’s Messy Fiscal Policy

    Investigate the muddy fiscal policy, tax problems, and inability to institute austerity that created the Greek crises in 2010 and 2015.
  8. Markets

    The Vodka Industry Keeps Growing, But Why?

    Understand what the vodka industry is and where it performs best. Learn about the growth of the industry and three reason why it continues to grow.
  9. Fundamental Analysis

    Is India the Next Emerging Markets Superstar?

    With a shift towards manufacturing and services, India could be the next emerging market superstar. Here, we provide a detailed breakdown of its GDP.
  10. Term

    What is the Macro Environment?

    The macro environment is the conditions existing in an economy as a whole, rather than in a single sector or region.
RELATED FAQS
  1. How is the Federal Reserve audited?

    Contrary to conventional wisdom, the Federal Reserve is extensively audited. Politicians on the left and right of a populist ... Read Full Answer >>
  2. Who decides when to print money in the US?

    The U.S. Treasury decides to print money in the United States as it owns and operates printing presses. However, the Federal ... Read Full Answer >>
  3. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>
  4. How do dividend distributions affect additional paid in capital?

    Whether a dividend distribution has any effect on additional paid-in capital depends solely on what type of dividend is issued: ... Read Full Answer >>
  5. Why can additional paid in capital never have a negative balance?

    The additional paid-in capital figure on a company's balance sheet can never be negative because companies do not pay investors ... Read Full Answer >>
  6. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  2. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  3. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  4. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  5. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
  6. Wedding Warrant

    A warrant that can only be exercised if the host asset, typically a bond or preferred stock, is surrendered. Until the call ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!