Unit of Account
1 min read
A unit of account is the standard denomination of money used by investors, economists, and accountants to measure value. A unit of account provides a common reference point to convey value across different goods. For example, inches are a unit of measure for length in the same way that dollars are a unit of account for value.
The Swiss Franc is commonly used as a unit of account for historical comparisons of currency value because it has maintained relatively consistent value over a long period of time, unlike other fiat currencies.
International transactions can include multiple denominations of currency. In these transactions, the dollar is typically chosen to serve as a unit of account for the involved parties. However, a unit of account must have a relatively consistent value to be a reliable measurement of value.
Money that fluctuates in value does not operate well as a unit of account. When a unit of account continually increases or decreases in value relative to the currency of each party, it can add confusion to the transaction and tax accounting.