Monetary asset definition
/What is a Monetary Asset?
A monetary asset is an asset whose value is stated in or convertible into a fixed amount of cash. Thus, $50,000 of cash now will still be considered $50,000 of cash one year from now. In an inflationary environment, monetary assets will decline in value, unless they are invested in interest-bearing or appreciating assets that provide returns matching or exceeding the rate of inflation.
Presentation of Monetary Assets
All monetary assets are considered to be current assets, and are reported as such on a company's balance sheet. In essence, if an asset is classified as a long-term asset, then it cannot be a monetary asset.
Examples of Monetary Assets
Here is a list of common types of monetary assets:
Cash. Physical currency held on hand.
Checking accounts. Bank accounts that allow for easy access to funds.
Savings accounts. Bank accounts that earn interest and are accessible with some limitations.
Certificates of deposit. Time deposits with banks, typically with a fixed interest rate and maturity date.
Money market accounts. Interest-earning accounts that offer limited check-writing abilities.
Treasury bills. Short-term government securities that mature within a year and are highly liquid.
Commercial paper. Short-term unsecured promissory notes issued by companies to meet immediate funding needs.
Repurchase agreements. Short-term borrowing instruments typically used in financial markets.
Short-term bonds. Bonds with a maturity of less than one year, which are highly liquid.
Foreign currency holdings. Cash or cash equivalents held in foreign currencies.
Accounts receivable. Money owed by customers for goods or services already provided, assuming they are collected quickly.
Cryptocurrencies. Digital or virtual currencies like Bitcoin or Ethereum that can often be liquidated quickly.
Digital payment balances. Balances held in accounts like PayPal, Venmo, or Cash App.
Savings bonds. Government-issued bonds that can be redeemed after a minimum holding period.
Exchange-traded funds (ETFs). Though typically investments, some ETFs are highly liquid and close to cash.
Each of these assets varies in terms of liquidity, risk, and return. Monetary assets are usually chosen based on how quickly they can be converted to cash while preserving their value.
Longer-term assets such as fixed assets are not considered to be monetary assets, since their values decline over time.