REPORTED BY: CYRIL, BRYAN, ROCEL, ADRIAN,

MIKAELA AND MARK ANTHONY

Monetary Unit Principle and

Business Entity Principle

GROUP 2

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 What is Monetary Unit
Principle?
> states that a company must record its business
transactions in dollars or some other unit of currency.

> a company cannot record such non-quantifiable items

as employee skill levels, the quality of customer
service, or the ingenuity of the engineering staff.

2
> The monetary unit principle also assumes that the
value of the unit of currency in which you record
transactions remains relatively stable over time.
However, given the amount of persistent currency
inflation in most economies, this assumption is not
correct

3
4
 : The monetary unit principle is also
known as the monetary unit concept
and the monetary unit assumption.

: Monetary unit assumption concept’ does

not take the ‘inflation’ matters into
consideration. This means that the concept
and implication thereof is totally
independent from the effects of inflation
taking place in the economy. 5
what is entity
business concept
?
> This concept allows individuals to analyze the financial
performance accurately, whether inside the company or not.

> States that the accounting records for even the simplest
business, the sole trader, must be kept separate from the
personal affairs of the owner or owners.

> States that the transactions associated with a business

must be separately recorded from those of its owners or
other businesses.
6
> This concept is also known as the Economic Entity
Concept, which means that the owner of the business and
the business itself are considered as two separate entities.

> In addition, the personal affairs and finances of the

owners must not be included within business financial
records. This allows accurate recording of the business'
performance. An investor will be able to determine
whether a company has a profitable cash flow from its
operations or whether its owner keeps funding the
company with their own contributions.
7
8
Importance
Importance of
of Business
Business
Entity
Entity Concept
Concept

9
 The End :)

Thank you for listening!

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