Question

A problem with the monetary unit assumption is that A. the dollar is a common medium of exchange. B. the dollar has been stable over time. C. the dollar has not been stable over time. D. it is impossible to account for international transactions.

Answer 1

Answer: Option C

Explanation: As per the monetary unit assumption, only those transactions that could be valued in monetary terms are considered to be important. The transactions or events that have only qualitative aspects are non relevant for accounting purposes.

It makes a assumption that the value of dollar will remain stable over time, which is incorrect. This concept does not take into consideration the problem caused by the historic cost recording.

Hence from the above we can conclude that the correct option is C.