Monetary item definition

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What is a Monetary Item?

A monetary item is an asset or liability that conveys a right to receive or deliver either a fixed or determinable number of units of currency. Monetary items continue to be convertible into the same amount of currency over time. Their main characteristic is that they represent a sum of cash, into which they can be readily converted.

Nonmonetary items tend to be convertible into varying amounts of money, based on changes in supply and demand and the presence of obsolescence. For example, a monetary item such as a certificate of deposit is convertible into $1,000, while a vehicle will likely decline in value over time as it ages.

Examples of Monetary Items

Here are multiple examples of monetary items:

Physical Currency

  • Coins. Pennies, nickels, dimes, quarters, euros, yen coins, etc.

  • Banknotes. Dollar bills, euro notes, yen bills, etc.

Digital and Electronic Currency

  • Cryptocurrencies. Bitcoin, Ethereum, Dogecoin, etc.

  • Digital payment balances. PayPal balance, Venmo balance, etc.

Bank Instruments

  • Checks. Personal checks, cashier's checks, money orders.

  • Savings certificates. Certificates of deposit (CDs).

  • Promissory notes. Legal documents representing an obligation to pay.

Precious Metals

  • Gold coins

  • Silver bars

  • Platinum bullion

Government-Backed Securities

  • Treasury bonds

  • Treasury bills

Monetary liabilities include accounts payable, sales taxes payable, and notes payable.

Impact of Inflation on Monetary Items

When monetary assets are held, their purchasing power tends to decline as inflation reduces their value. Conversely, when monetary liabilities are held, their purchasing power increases, because they can be paid off with funds that have declined in value because of the effects of inflation.