What Are Monetary Assets In Accounting And Their Examples
Monetary assets are an essential part of today’s growing world. Those businesses which use monetary assets properly can stable their brand in the market even during economic fluctuations. The current world uses digital currencies for exchanging goods and values which is a kind of monetary asset.
What Are Monetary Assets
Monetary assets are those assets that are readily available for conversion or have a fixed or determinable value. Monetary assets are short-term assets and are recorded in the balance sheet as current assets. The most popular examples of monetary assets are the followings:
- Cash
- Bonds
- Bank deposits
- Investment account
- Account receivable
- Digital currencies
- Savings Account, etc.
Characteristics Of Monetary Assets
There are two major characteristics of monetary assets which are followings:
- They change in real-time such as changes in buying power or time value of money
- They are not depreciated
NOTE: The prepayment can be recorded as a monetary or non-monetary asset as per the agreement. For example, if you pay for something in advance and the chances of the repayment are very low or almost no chance of getting payment back then it is considered a non-monetary asset but if there is a clause in the agreement through that prepayment can be taken back then it is classed as monetary assets.
FAQs
What are monetary items?
Items that are readily converted into cash or items that do not change their carrying value in the future are said to be monetary assets.
Is land a monetary asset?
Land is a non-monetary asset because it changes its value as per the market condition.
What is an example of a monetary asset?
Cash is the most common example of a monetary asset.
Is goodwill a monetary asset?
Goodwill is not a monetary asset, it is classified as a non-monetary asset because it takes much time for conversion.
What are the characteristics of monetary assets?
They are short terms assets and do not lose their carrying value.
Are intangible assets monetary assets?
Intangible assets are non-monetary assets because it is quite difficult to determine the actual value of an intangible asset.
Is equity a monetary asset?
Equity share is an example of a non-monetary asset.
What are the three monetary instruments?
Cash, account receivable, and bonds are examples of monetary instruments.
Are fixed assets monetary assets?
Long terms assets are generally not considered as monetary assets because they change their value with time.
Is prepayment a monetary asset?
Prepayment can be a monetary or non-monetary asset as per the contract.
Why are monetary assets important in a business?
Monetary assets are important to make a business stable during economic fluctuation.