Question

A basic assumption of accounting requires that companies include in the accounting records only transaction data that can be expressed in monetary terms is referred to as the:____

Answer 1

The basic assumption of accounting that transactions must be expressed in monetary terms is known as the unit of account principle, where money serves as a common denominator for measurement and comparison.

Step-by-step explanation:

A basic assumption of accounting that requires companies to record only transaction data that can be expressed in monetary terms is referred to as the unit of account principle.

This principle dictates that money acts as a common denominator, simplifying the process of accounting by allowing for a consistent method to measure and compare values.

For instance, an accountant's fee for filing a tax return may be $100, which also equivalently represents the value for two pairs of shoes priced at $50 each. Thus, transactions are recorded based on their monetary value, which facilitates comparisons and analysis in financial statements.