Your supervisor has informed you that your company’s CEO wants to know, “Is the assumption that the dollar is a stable unit of measurement realistic? What alternative procedures would you suggest?”
You have been directed to prepare a memo of 2–3 pages to explain this situation to the CEO of the company.
Take the following into consideration as you complete your assignment:
- What does the monetary principle mean?
- What is the basic measuring unit for financial reporting?
- What is the common denominator that is used to make and summarize accounting measurements?
- What are the stable units of distance and area?
- Why might the dollar not be a stable unit of value?