Unit of Account

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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.

Learn more about how inflation impacts a unit of account.