An asset is defined as a resource owned by a company that has high economic value. Monetary Assets and Non-Monetary Assets are two very vital elements in an organization. It brings a wide range of benefits. Every business has its own fixed assets.
Monetary Assets and Non-Monetary Assets differ in terms and value. Let”s get into some details to study them gain more knowledge.
Monetary Assets vs Non-Monetary Assets
The main difference between Monetary Assets and Non-Monetary Assets is that Monetary Assets can be converted into a specific amount of money on short notice. t is the daily funding required for business operations. Whereas, Non-Monetary Assets can not be easily converted into a specific amount of money within short notice. It is the future revenue generated for a business.
Monetary Assets can be referred to as tangible assets. It has a fixed economic value and can be converted into cash over a short period. To be precise, their face value does not change. So we can conclude that it is static. However, we need to keep in mind that in real terms, the value might fluctuate.
When inventories can not be converted into cash or can not be sold very easily, it is classified as non-Monetary assets also fall under Monetary Assets. They have their economic values. However, the value is not fixed, and it keeps fluctuating. Non-Monetary assets are used for business purposes for generating revenue.
Comparison Table Between Monetary Assets and Non-Monetary Assets
| Parameters of comparison | Monetary Assets | Non-Monetary Assets |
| Definition | Monetary assets are the assets that have their constant cash value. It can be retrieved when they are liquified. | Non-Monetary assets are the assets that do not have a constant value. It keeps fluctuating. |
| Liquidity | It is very easily liquidated and can be easily converted to cash. | It can not be liquidated easily and is not easy to convert into cash. |
| Function | Used in day- to-day business to fund the working capital. | Used for business purposes for generating revenue. |
| Cash Value | The cash value is fixed in absolute terms. It can only change in relative terms when there is a change in the value of money. | The cash value is not fixed. It can vary depending upon several market factors or government regulations. |
| Examples | Examples include cash. Bank balance and deposit. | Examples include machinery, property, and investments. |
What are Monetary Assets?
One of the characteristic features of Monetary Assets is their disclosure in financial statements. People who are linked to accounting are quite familiar with the values of assets. It is mandatory to update the value of assets every year.
A good point for Monetary Assets is that any change in the economic event will not lead to a change in value Liquidity is one of the main factors in Monetary Assets. It is defined as the ability of an asset to be sold with minimum loss in a minimum amount of time.
Monetary Assets are considered liquid. Current assets also fall under Monetary Assets. This is due to the reason that Current assets also fall under Monetary Assets. are easy to be sold. The dollar is the standard value for the measure of assets.
Current assets also fall under Monetary Assets. can be easily converted into dollar values, over a short period. The value is constant and thus can easily be quantified. The process of cast conversion is yet another unique feature.
What are Non-Monetary Assets?
Non-Monetary Assets do have a wide variety, the most common being properties. It can include personal property, equipment for commercial purposes, or some plant. They are considered intangible assets which are not physical in nature.
It comprises copyrights and trademarks. They are the type of assets held by the company which can not be determined in dollar value. In other words, they are assets that are not equivalent to cash.
How an asset is quantified is very important. Non-Monetary Assets are included in the balance sheet of a company. Non-Monetary Assets can include intellectual properties.
It is used by the company to generate revenue. Non-Monetary assets can not be liquidated easily and are not easy to convert into cash. Here, the cash value is not fixed. It can vary depending upon several market factors or government regulations.
Main Differences Between Monetary Assets and Non-Monetary Assets
- The main difference between Monetary Assets and Non-Monetary Assets is the value of assets. Monetary assets have their constant cash value. It can be retrieved when they are liquified. However, Non-Monetary assets are the assets that do not have a fixed value. It keeps fluctuating.
- Next comes liquidity. Monetary assets are very easily liquidated and can be easily converted to cash. On the other hand, Non-Monetary assets can not be liquidated easily and are not easy to convert into cash.
- Coming to functions, Monetary assets are used in day-to-day business to fund the working capital. Non-Monetary assets are used for business purposes for generating revenue.
- In Monetary assets, the cash value can only change in relative terms when there is a change in the value of money. In Non-Monetary assets, the cash value is not fixed. It can vary depending upon several market factors or government regulations.
- Last but not least, examples. Monetary assets examples. include cash. Bank balance and deposit. Non-Monetary assets include machinery, property, and investments.
Conclusion
Sometimes assets are confusing. They are difficult to be classified as Non-Monetary Assets or Monetary Assets. However, the deciding factor is easy. We come to the ground rule to decide if the asset can easily be converted into cash. If yes, it falls under the category of Monetary Assets.
One of the best ways to identify Non-Monetary Assets is that they do not have a fixed value. It keeps on fluctuating and eventually, the company needs to adjust the market value. This process takes place with the market and economic conditions accordingly. Non-Monetary assets include machinery, property, and investments.
References
- https://search.informit.org/doi/abs/10.3316/INFORMIT.044518298751571
- https://en.cnki.com.cn/Article_en/CJFDTotal-JLZY200502009.htm