The Assumption That Requires Only Those Things That Can Be Expressed In Money Are Included In The Accounting Records Is The

The correct answer of this multiple choice (mcq) is (B), as under Monetary Unit Assumption, only those business events are recorded in the books of accounts and then transferred to financial statements which can be expressed in terms of money. All the events which can’t be related with monetary transactions or business transactions are not accounted for in business’ records. For example, “We will sell the goods to customers”, it’s just a statement, which shows the willingness of the seller to sell products or goods to customers in future, but it is not considered as a monetary transaction as no money is involved in it, but when we say that “We sold goods worth $5,000 to customers for cash”, then this statement shows a business transaction in which money ($5,000) is involved between seller and buyers. The unit of money is “Dollar”. So, a transaction of worth $5,000 takes place between seller and buyers and this monetary transaction is recorded in the books of accounts of seller’s business.

The entry to record for this monetary transaction from the point view of seller is shown below:

Cash a/c  $5,000

              Sales a/c $5,000

(Goods Sold To Customers)

Cash account is increasing with monetary value of $5,000 and sales account is also increasing with the monetary value of $5,000. Cas increases the assets by $5,000 on balance sheet while sales affect equity account and also increases it on balance sheet by $5,000.

Due to monetary unit assumption, the business is able to show its financial performance and financial health to the users of accounting information such as employees, customers, investors, management, owners, etc. Without monetary value, business can’t show its profits for the period and balance positions of its assets, liabilities and equity on a particular time.

The other options (A, C and D) of this mcq are wrong choices here.