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Monetary unit principle

Monetary unit principle states business events must be measured in monetary terms and recorded in the accounting record. If the business cannot allocate monetary units for the specific event/transactions, it should not be recorded in the financial statement.

For instance, your team motivation, leadership charisma, management expertise, customer experience, and service quality can not be recorded in the financial statement because these aspects can not be measured in monetary terms.

Monetary units refer to measuring transactions in functional currency. Functional currency is any currency prevailing in the primary economic environment.

On the other hand, presentation currency is the one used for presenting financial statement.

The International Accounting standard does not require the use of any specific presentation currency. However, all transactions must be presented in a single currency when generating a specific set of financial statements. Transactions in other currencies must be translated to the presentation currency on the date of the financial statement. So, all transactions can be presented consistently.

Per the monetary unit principle, the events/transactions must be measured in monetary/currency units and recorded in the financial statement. On the other hand, if events can not be measured in monetary terms, they should not be recorded in the financial statement. For instance, your team motivation, service quality, and teamwork can not be measured in monetary value and should not be recorded in the financial statement.  

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Daniyal Khatri, ACCA, is a seasoned bookkeeping specialist with over a decade of experience in designing precise, compliant financial systems. His expertise spans daily transaction tracking, ledger management, and financial record accuracy, ensuring businesses maintain organized, audit-ready books. Daniyal excels at aligning processes with evolving compliance standards, integrating user-friendly tools to automate workflows, and translating regulatory complexities into actionable steps. By combining technical proficiency with a focus on clarity, he empowers organizations to achieve error-free bookkeeping, minimize risk, and build a foundation for informed financial decisions.

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