Monetary Item


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 It may lose value over the years as it becomes outdated.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

  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 ...
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