A unit of account is a standard numerical unit of measurement for the market value of goods, services, and other transactions. It is one of three elements that must be met before something can be considered money. An example of Money. ...

Uses

A standard unit of account is used to rank different organizations, activities, and goods and services, using a single standard. In modern economies, money in the form of currency serves the role as a standard unit of account with respect to all market activity. It allows for the price of goods and services to be comparable. An example of Money. ... In economics and business, the price is the assigned numerical monetary value of a good, service or asset. ...

In Accounting, a standard unit of account allows for the ranking of the economic status of different organizations and activities. This serves to allocate scarce resources in a way most beneficial to an economy. The use of a unit of account in financial accounting allows investors to invest capital into those companies that provide the highest rates of return. The use of a unit of account in managerial accounting enables firms able to choose between activities that yield the highest profit. Accountancy (British English) or accounting (American English) is the process of maintaining, auditing, and processing financial information for business purposes. ... The field of accounting that serves external decision makers, such as stockholders, suppliers, banks and government agencies See also: Management accounting field of accounting concerned with external users of a companys financial information. ... It has been suggested that this article or section be merged with Cost accounting. ...

In Economics, a standard unit of account is used for statistical purposes to describe economic activity. Indexes such as GDP and the CPI are so broad in their scope that compiling them would be impossible without a standard unit of account. After being compiled, these figures are often used to guide governmental policy; especially monetary and fiscal policy. Buyers bargain for good prices while sellers put forth their best front in Chichicastenango Market, Guatemala. ...

In calculating the Opportunity Cost of a policy, a standard unit of account allows for the creation of a composite good. A composite good is a theoretical abstraction that represents an aggregation of all other oppurtunities that are not realized by the first good. It allows an economic decision's benefits to be weighed against the costs of all other possible goods in that society, without having to refer to any directly. Often, this easily accomplished with money. Opportunity cost is a term used in economics to mean the cost of something in terms of an opportunity forgone (and the benefits that could be received from that opportunity), or the most valuable forgone alternative. ... // Definition A composite good is an abstraction used in economics that represents all other choices of consumption that can be made. ... An example of Money. ...

See also