Question

Explain the difference between monetary and nonmonetary assets and liabilities. Please answer in your own words. Do not use outside resources.

Answer 1

Monetary assets are assets which have a pre-determined cash value i.e., a fixed and constant amount that can be received when they are liquidated. These assets are also fairly easy to liquidate.

Examples of monetary assets include:

Cash balance

Bank balance

Fixed deposits

Accounts receivable

Notes receivable

Non-monetary assets are assets whose cash value is not pre-determined at a fixed amount and can change significantly over time. These assets are also tougher to liquidate.

Examples of non-monetary assets include:

• Market investments
• Manufacturing fixed assets such as plant and machinery
• Property