What is Monetary unit, Economic entity and cost assumptions

Discussion about what is a monetary unit, economic entity, and cost assumptions are given with an example below:

Monetary unit assumptionMonetary unit assumption means that business transactions, events or accounting information are measured in terms of money.

Example: Mr. X invested in Business Tk. 3,00,000.00. Here taka is the monetary unit. The monetary unit can be any term like the dollar ($), pound, Owen or etc. On the other hand, the efficient execution of a business entity switched to another business.  We have a substantial loss.

Economic Entity Assumption: The economic entity assumption requires that the activities of the entity be kept separate and distinct from the activities of its owner and all other economic entity.

Example: Mr. Jashim, the owner of Jahim publishers, should keep his personal living costs separate from the expenses of the Jashim publishers.

Cost Principle: This principle states that assets should be recorded at their cost.

1 comment for “What is Monetary unit, Economic entity and cost assumptions

  1. jeffar
    March 23, 2018 at 4:56 AM

    Great note helpful for study, thanks for sharing.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.