Monetary assets are assets that have a stated value in the accounts of the individual or business that can in fact be realized for that same amount at any time. Assets of this type include the current balances in various types of bank accounts, cash on hand, and the current balance found in the accounts receivable of a company’s accounting books. The identifying characteristic that sets monetary assets apart from other types of assets is this fixed value that remains the same regardless of what is happening in the economy.
There are a number of other types of financial assets that do not meet this basic qualification as monetary assets. For example, stocks and other types of securities may or may not retain the value currently noted in the company’s accounting records. At the same time, the stated value of any property owned by the business, including any machinery used in the business operation, will either appreciate or depreciate over time. Essentially, any type of asset that is likely to either increase or decrease in value cannot be referred to as a monetary asset.
There are several advantages of monetary assets. The most obvious is that the assets are immediately available to aid in the settlement of any sudden debts that may appear. For example, the balances found in checking or savings accounts are unencumbered from any restrictions, making it possible to use all or a portion of those types of monetary assets whenever the need arises. This is different from assets such as real estate, in which there would be a need to find a buyer, assess the current market value, then arrive at a sale price that may or may not match the value stated in the accounting books.
Monetary assets are often considered key to the day-to-day operations of a household or a business. The balance on hand in terms of cash is key to scheduling the payment of debt obligations. Households project the ability to meet those obligations based on the frequency of receiving income from jobs held by members of the household. In like manner, businesses structure payment schedules for various debts based on the anticipated receipts from outstanding items in the accounts payable, such as invoices issued to customers. By basing the operation of the business or household on use of assets that are considered realizable at any given point in time, there is less potential for shortfalls to occur that seriously hamper the ability to tender payments to creditors as the result of a loss in value sustained by some other type of financial asset.
