What is a 'Monetary Item'

A monetary item is 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 do not change even though the purchasing power of a dollar can potentially change.

BREAKING DOWN 'Monetary Item'

The most common monetary item is simply cash, whether a debt owed by a company (liability), a debt owed to it (asset) or a pile of cash in its account (asset). $100,000 of cash today will still be worth $100,000 a year later. If 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. Because the value is fixed at $40,000, this account payable is considered a monetary item. Bank deposits, short-term fixed income instruments and accounts receivable are monetary assets since they all can be readily converted into a fixed amount of money within a short time span. Monetary items are booked as current assets or liabilities on the balance sheet.

Monetary Item vs. Nonmonetary Item

A nonmonetary item is subject to a change in value and cannot be quickly converted to cash. A factory or piece of equipment is a nonmonetary item because its value generally declines over time with usage. Inventory is also a nonmonetary asset because it can become obsolete. Other nonmonetary items include intangible assets, long-term investments and certain long-term liabilities such as pension obligations, all of which could either rise or fall in value from period to period.

RELATED TERMS
  1. Nonmonetary Assets

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

    A nonmonetary transaction is a transaction that does not result ...
  3. Excluding Items

    Excluding Items refers to the common practice of leaving certain ...
  4. Noncash Item

    A noncash item is an item deposited to an account but not credited ...
  5. Transit Item

    A transit item is any check or draft that is issued by an institution ...
  6. Current Liabilities

    Current liabilities are a company's debts or obligations that ...
Related Articles
  1. Investing

    Financial Statement: Extraordinary Vs. Nonrecurring Items

    When it comes to analyzing a company, successful analysts spend considerable time differentiating between accounting items that are likely to recur going forward from those that most likely will ...
  2. Personal Finance

    How To Improve Net Worth By Decreasing Liabilities

    Here's an analysis of how to adjust liabilities and assets to improve net worth.
  3. Personal Finance

    How To Use Price Adjustments To Get The Best Deals

    We take a look at 6 top retailers' price adjustment policies, and tell you how to get your money's worth.
  4. Investing

    Breaking Down The Balance Sheet

    Knowing what the company's financial statements mean will help you to analyze your investments.
  5. Trading

    Are Dollar Stores Really A Bargain?

    It's hard to resist an item that's $1. We tell you when you should fight the urge.
  6. Investing

    Examples Of Asset/Liability Management

    In its simplest form, asset/liability management entails managing assets and cash inflows to satisfy various obligations; however, it's rarely that simple.
  7. Investing

    How To Decode A Company's Earnings Reports

    Read between the lines to decipher a company's true financial condition.
RELATED FAQS
  1. What items on the balance sheet are most important in fundamental analysis?

    Read about which balance sheet items are considered most important for fundamental analysis, including cash, current liabilities ... Read Answer >>
  2. How do you calculate net debt using Excel?

    Learn about the net debt formula and how to calculate this financial metric using Microsoft Excel, including a brief explanation ... Read Answer >>
  3. What is the accounting treatment for unusual or infrequent items for IFRS and U.S. ...

    Learn to identify the unusual or infrequent items listed on an income statement prepared according to either US GAAP or IFRS ... Read Answer >>
  4. Are accounts payable an expense?

    Learn about how to differentiate between liability accounts and expense accounts, and see why accounts payable is considered ... Read Answer >>
  5. How do net income and operating cash flow differ?

    Net income is the profit a company has earned for a period while cash flow from operating activities measures, in part, the ... Read Answer >>
  6. What is the difference between carrying value and fair value?

    Learn about the carrying value and fair value of assets and liabilities, what the carrying and fair value measure and the ... Read Answer >>
Hot Definitions
  1. Discount Rate

    Discount rate is the interest rate charged to commercial banks and other depository institutions for loans received from ...
  2. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  3. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  4. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  5. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  6. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
Trading Center