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 It may lose value over the years as it becomes outdated.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.

INVESTOPEDIA EXPLAINS '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. Nonmonetary Assets

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

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

    A measure that examines the weighted average of prices of a basket ...
  4. Inflation

    The rate at which the general level of prices for goods and services ...
  5. Federal Reserve System - FRS

    The central bank of the United States. The Fed, as it is commonly ...
  6. Deflation

    A general decline in prices, often caused by a reduction in the ...
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. Fundamental Analysis

    What's a Tangible Asset?

    Tangible assets are property owned by a business that can be touched -- they physically exist. Examples include furniture and fixtures, computer hardware, delivery equipment, leasehold improvements ...
  7. Fundamental Analysis

    Cash Flow From Operating Activities

    Cash flow from operating activities is a section of the Statement of Cash Flows that is included in a company’s financial statements after the balance sheet and income statements.
  8. Fundamental Analysis

    What are the components of shareholders' equity?

    Understanding company valuation figures, such as shareholders' equity, can be a powerful tool in assessing the financial strength of a business.
  9. Fundamental Analysis

    What is the difference between the acid test ratio and working capital ratio?

    Using liquidity ratios to determine the financial stability of a company is an important tool to accounting professionals and investors.
  10. Fundamental Analysis

    What are some examples of return on investment capital?

    Read about some basic examples of return on investment capital for publicly traded companies and companies that have a handful of investors.

You May Also Like

Hot Definitions
  1. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  2. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  3. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  4. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  5. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  6. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
Trading Center