Science is simply common sense at its best - that is, rigidly accurate in observation, and merciless to fallacy in logic. Thomas Huxley
The economy consists of economic entities and economic items.
Economic items have economic value. Accountants do not simply record what happened in the past. Accountants are not simply scorekeepers. Accountants value economic items every time they account them. Utility, scarcity and exchangeability are the three basic attributes of an economic item which, in combination, give it economic value.
It is generally accepted that there are only two basic, fundamentally different economic items in the economy; namely, monetary and non-monetary items and that the economy is divided in the monetary and non-monetary or real economy. That is a fallacy.
The three fundamentally different basic economic items in the economy are:
a) Monetary items
b) Variable real value non-monetary items
c) Constant real value non-monetary items
The economy consequently consists of not just two – the monetary and non-monetary economies, but, three parts:
1. Monetary economy
The monetary economy within an economy or monetary union consists of functional currency bank notes and coins (which generally make up about 7% of the overall money supply) and other functional currency monetary items, e.g. bank loans, savings, credit card loans, car loans, home loans, student loans, consumer loans, commercial and government bonds and other functional currency monetary items making up the fiat money supply created in the banking system by means of fractional reserve banking.
2. Variable item non-monetary economy
The variable item economy is made up of non-monetary items with variable real values over time; for example, cars, groceries, houses, factories, property, plant, equipment, inventory, mobile phones, quoted and unquoted shares, foreign exchange, finished goods, raw material, etc.
3. Constant item non-monetary economy
The constant item economy consists of non-monetary items with constant real values over time, e.g. salaries, wages, rentals, all other income statement items, balance sheet constant items, e.g. issued share capital, share premium, share discount, capital reserves, revaluation reserve, retained profits, all other items in shareholders´ equity, provisions, trade debtors, trade creditors, taxes payable, taxes receivable, all other non-monetary payables and all other non-monetary receivables, etc.
The variable and constant item non-monetary economies in combination make up the non-monetary or real economy. The real and monetary economies constitute the economy.
© 2005-2010 by Nicolaas J Smith. All rights reserved. No reproduction without permission.
Fin24 15-3-11
Showing posts with label Three economic items. Show all posts
Showing posts with label Three economic items. Show all posts
Friday 19 November 2010
Tuesday 12 October 2010
Three economic items
Science is simply common sense at its best - that is, rigidly accurate in observation, and merciless to fallacy in logic. Thomas Huxley
The economy consists of economic items and economic entities.
Economic items have economic value. Accountants do not simply record what happened in the past in Historical Cost terms. Accountants are not simply scorekeepers. Accountants value each and every economic item every time they account them. Utility, scarcity and exchangeability are the three basic attributes of an economic item which, in combination, give it economic value.
It is generally accepted that there are only two basic, fundamentally different economic items in the economy, namely, monetary and non-monetary items and that the economy is divided in the monetary and non-monetary or real economy. That is an economic fallacy.
The three fundamentally different basic economic items in the economy are:
1. Monetary items
2. Variable real value non-monetary items
3. Constant real value non-monetary items
The economy consequently consists of not just two – the monetary and non-monetary economies, but, three parts:
1. Monetary economy
The monetary economy consists of functional currency bank notes and coins and other functional currency monetary items, e.g. bank loans, savings, credit card loans, car loans, home loans, student loans, consumer loans, commercial and government bonds and other functional currency monetary items making up the money supply.
2. Variable item non-monetary economy
The variable item economy is made up of non-monetary items with variable real values over time; for example, cars, groceries, houses, factories, property, plant, equipment, inventory, mobile phones, quoted and unquoted shares, foreign exchange, finished goods, etc.
3. Constant item non-monetary economy
The constant item economy consists of non-monetary items with constant real values over time, e.g. salaries, wages, rentals, all other income statement items, balance sheet constant items, e.g. issued share capital, share premium, share discount, capital reserves, revaluation reserve, retained profits, all other items in shareholders´ equity, provisions, trade debtors, trade creditors, taxes payable, taxes receivable, all other non-monetary payables and all other non-monetary receivables, etc.
The variable and constant item non-monetary economies in combination make up the non-monetary or real economy. The real and monetary economies constitute the economy.
The monetary economy can disappear completely or be totally destroyed like in the case of Zimbabwe as a result of hyperinflation. The real or non-monetary economy (houses, properties, buildings, infrastructure, inventories, finished goods, consumer goods, trademarks, goodwill, logos, copyright, trade debtors, trade creditors, royalties payable, royalties receivable, taxes payable, taxes receivable, all other non-monetary payables, all other non-monetary receivables, etc,) can not be destroyed by hyperinflation: inflation is always and everywhere a monetary phenomenon. Inflation has no effect on the real value of non-monetary items.
Trade debtors and trade creditors are constant real value non-monetary items and not monetary items as stated by the US Financial Accounting Standards Board, the International Accounting Standards Board, in International Financial Reporting Standards and by PricewaterhouseCoopers, amongst most probably all others.
Under the current Historical Cost paradigm many constant items, e.g. trade debtors, trade creditors, other non-monetary payables, other non-monetary receivables, salaries, wages, etc are incorrectly treated as monetary items. The real values of these items are currently unnecessarily being destroyed by the implementation of the stable measuring unit assumption during low and high inflation. In a hyperinflationary monetary meltdown like in the case of Zimbabwe all these items are unnecessarily destroyed completely – because they are incorrectly treated as monetary items.
Under financial capital maintenance in units of constant purchasing power as authorized in IFRS in the Framework, Par 104 (a) in 1989, these items are correctly treated as non-monetary items and their real values would not be destroyed at the rate of low or high inflation or they would not be completely destroyed in a hyperinflationary monetary meltdown like what happened in Zimbabwe. Their real values were not destroyed during 30 years of high and hyperinflation in Brazil from 1964 to 1994 because they were treated correctly as non-monetary items in Brazil and updated daily in terms of a daily index supplied by the government.
© Copyright 2010 Nicolaas J Smith
The economy consists of economic items and economic entities.
Economic items have economic value. Accountants do not simply record what happened in the past in Historical Cost terms. Accountants are not simply scorekeepers. Accountants value each and every economic item every time they account them. Utility, scarcity and exchangeability are the three basic attributes of an economic item which, in combination, give it economic value.
It is generally accepted that there are only two basic, fundamentally different economic items in the economy, namely, monetary and non-monetary items and that the economy is divided in the monetary and non-monetary or real economy. That is an economic fallacy.
The three fundamentally different basic economic items in the economy are:
1. Monetary items
2. Variable real value non-monetary items
3. Constant real value non-monetary items
The economy consequently consists of not just two – the monetary and non-monetary economies, but, three parts:
1. Monetary economy
The monetary economy consists of functional currency bank notes and coins and other functional currency monetary items, e.g. bank loans, savings, credit card loans, car loans, home loans, student loans, consumer loans, commercial and government bonds and other functional currency monetary items making up the money supply.
2. Variable item non-monetary economy
The variable item economy is made up of non-monetary items with variable real values over time; for example, cars, groceries, houses, factories, property, plant, equipment, inventory, mobile phones, quoted and unquoted shares, foreign exchange, finished goods, etc.
3. Constant item non-monetary economy
The constant item economy consists of non-monetary items with constant real values over time, e.g. salaries, wages, rentals, all other income statement items, balance sheet constant items, e.g. issued share capital, share premium, share discount, capital reserves, revaluation reserve, retained profits, all other items in shareholders´ equity, provisions, trade debtors, trade creditors, taxes payable, taxes receivable, all other non-monetary payables and all other non-monetary receivables, etc.
The variable and constant item non-monetary economies in combination make up the non-monetary or real economy. The real and monetary economies constitute the economy.
The monetary economy can disappear completely or be totally destroyed like in the case of Zimbabwe as a result of hyperinflation. The real or non-monetary economy (houses, properties, buildings, infrastructure, inventories, finished goods, consumer goods, trademarks, goodwill, logos, copyright, trade debtors, trade creditors, royalties payable, royalties receivable, taxes payable, taxes receivable, all other non-monetary payables, all other non-monetary receivables, etc,) can not be destroyed by hyperinflation: inflation is always and everywhere a monetary phenomenon. Inflation has no effect on the real value of non-monetary items.
Trade debtors and trade creditors are constant real value non-monetary items and not monetary items as stated by the US Financial Accounting Standards Board, the International Accounting Standards Board, in International Financial Reporting Standards and by PricewaterhouseCoopers, amongst most probably all others.
Under the current Historical Cost paradigm many constant items, e.g. trade debtors, trade creditors, other non-monetary payables, other non-monetary receivables, salaries, wages, etc are incorrectly treated as monetary items. The real values of these items are currently unnecessarily being destroyed by the implementation of the stable measuring unit assumption during low and high inflation. In a hyperinflationary monetary meltdown like in the case of Zimbabwe all these items are unnecessarily destroyed completely – because they are incorrectly treated as monetary items.
Under financial capital maintenance in units of constant purchasing power as authorized in IFRS in the Framework, Par 104 (a) in 1989, these items are correctly treated as non-monetary items and their real values would not be destroyed at the rate of low or high inflation or they would not be completely destroyed in a hyperinflationary monetary meltdown like what happened in Zimbabwe. Their real values were not destroyed during 30 years of high and hyperinflation in Brazil from 1964 to 1994 because they were treated correctly as non-monetary items in Brazil and updated daily in terms of a daily index supplied by the government.
© Copyright 2010 Nicolaas J Smith
Wednesday 6 October 2010
Three economic items
The economy consists of economic items and economic entities.
Economic items have economic value. Accountants value economic items when they account them. Utility, scarcity and exchangeability are the three basic attributes of an economic item which, in combination, give it economic value.
It is generally accepted that there are only two basic, fundamentally different economic items in the economy, namely, monetary and non-monetary items and that the economy is divided in the monetary and non-monetary or real economy. This is an economic fallacy.
The three fundamentally different basic economic items in the economy are:
a) Monetary items
b) Variable real value non-monetary items
c) Constant real value non-monetary items
The SA economy consequently consists of not just two – the monetary and non-monetary economy, but, three parts:
1. Monetary economy
The SA monetary economy consists of Rand bank notes and coins and other Rand monetary items, e.g. bank loans, savings, credit card loans, car loans, home loans, student loans, consumer loans and other monetary items making up the money supply in SA.
2. Variable item non-monetary economy
The variable item economy is made up of non-monetary items with variable real values over time; for example, cars, groceries, houses, factories, property, plant, equipment, inventory, mobile phones, quoted and unquoted shares, foreign exchange, finished goods, etc.
3. Constant item non-monetary economy
The constant item economy consists of non-monetary items with constant real values over time, e.g. salaries, wages, rentals, all other income statement items, balance sheet constant items, e.g. issued share capital, share premium, share discount, capital reserves, revaluation reserve, retained profits, all other items in shareholders´ equity, provisions, trade debtors, trade creditors, taxes payable, taxes receivable, all other non-monetary payables and all other non-monetary receivables, etc.
The variable and constant item non-monetary economies in combination make up the non-monetary or real economy. The real and monetary economies constitute the SA economy.
Trade debtors and trade creditors are constant real value non-monetary items and not monetary items as stated by the US Financial Accounting Standards Board, the International Accounting Standards Board, in International Financial Reporting Standards and by PricewaterhouseCoopers, amongst others
Copyright © 2010 Nicolaas J Smith
Economic items have economic value. Accountants value economic items when they account them. Utility, scarcity and exchangeability are the three basic attributes of an economic item which, in combination, give it economic value.
It is generally accepted that there are only two basic, fundamentally different economic items in the economy, namely, monetary and non-monetary items and that the economy is divided in the monetary and non-monetary or real economy. This is an economic fallacy.
The three fundamentally different basic economic items in the economy are:
a) Monetary items
b) Variable real value non-monetary items
c) Constant real value non-monetary items
The SA economy consequently consists of not just two – the monetary and non-monetary economy, but, three parts:
1. Monetary economy
The SA monetary economy consists of Rand bank notes and coins and other Rand monetary items, e.g. bank loans, savings, credit card loans, car loans, home loans, student loans, consumer loans and other monetary items making up the money supply in SA.
2. Variable item non-monetary economy
The variable item economy is made up of non-monetary items with variable real values over time; for example, cars, groceries, houses, factories, property, plant, equipment, inventory, mobile phones, quoted and unquoted shares, foreign exchange, finished goods, etc.
3. Constant item non-monetary economy
The constant item economy consists of non-monetary items with constant real values over time, e.g. salaries, wages, rentals, all other income statement items, balance sheet constant items, e.g. issued share capital, share premium, share discount, capital reserves, revaluation reserve, retained profits, all other items in shareholders´ equity, provisions, trade debtors, trade creditors, taxes payable, taxes receivable, all other non-monetary payables and all other non-monetary receivables, etc.
The variable and constant item non-monetary economies in combination make up the non-monetary or real economy. The real and monetary economies constitute the SA economy.
The monetary economy can disappear or be totally destroyed like in the case of Zimbabwe
Trade debtors and trade creditors are constant real value non-monetary items and not monetary items as stated by the US Financial Accounting Standards Board, the International Accounting Standards Board, in International Financial Reporting Standards and by PricewaterhouseCoopers, amongst others
Copyright © 2010 Nicolaas J Smith
Tuesday 12 January 2010
Three economic items
Science is simply common sense at its best - that is, rigidly accurate in observation, and merciless to fallacy in logic. Thomas Huxley
The economy consists of economic items and economic entities. Economic items have economic value. Accountants value economic items when they account them. Utility, scarcity and exchangeability are the three basic attributes of an economic item which, in combination, give it economic value. The three fundamentally different basic economic items in the economy are
a) monetary items
b) variable real value non-monetary items
c) constant real value non-monetary items
The SA economy consequently consists of three parts:
1. Monetary economy
The SA monetary economy consists of the Rand money supply and other Rand monetary items, i.e. Rand money loans: e.g. bank loans, savings, credit card loans, car loans, home loans, student loans, consumer loans, etc.
2. Variable item non-monetary economy
Non-monetary items with variable real values over time; for example, cars, groceries, houses, factories, property, plant, equipment, inventory, mobile phones, quoted and unquoted shares, foreign exchange, finished goods products, etc. Variable items are all economic items you generally see around you except monetary and constant items.
3. Constant item non-monetary economy
Constant items are non-monetary items with constant real values over time: income statement items like salaries, wages, rentals, etc and balance sheet constant items like issued share capital, reported retained profits, all other items in shareholders´ equity, provisions, trade debtors, trade creditors, taxes payable, taxes receivable, all other non-monetary payables and receivables, etc.
The variable and constant item non-monetary economies in combination make up the non-monetary or real economy which together with the monetary economy constitute the SA economy.
Kindest regards,
Nicolaas Smith
The economy consists of economic items and economic entities. Economic items have economic value. Accountants value economic items when they account them. Utility, scarcity and exchangeability are the three basic attributes of an economic item which, in combination, give it economic value. The three fundamentally different basic economic items in the economy are
a) monetary items
b) variable real value non-monetary items
c) constant real value non-monetary items
The SA economy consequently consists of three parts:
1. Monetary economy
The SA monetary economy consists of the Rand money supply and other Rand monetary items, i.e. Rand money loans: e.g. bank loans, savings, credit card loans, car loans, home loans, student loans, consumer loans, etc.
2. Variable item non-monetary economy
Non-monetary items with variable real values over time; for example, cars, groceries, houses, factories, property, plant, equipment, inventory, mobile phones, quoted and unquoted shares, foreign exchange, finished goods products, etc. Variable items are all economic items you generally see around you except monetary and constant items.
3. Constant item non-monetary economy
Constant items are non-monetary items with constant real values over time: income statement items like salaries, wages, rentals, etc and balance sheet constant items like issued share capital, reported retained profits, all other items in shareholders´ equity, provisions, trade debtors, trade creditors, taxes payable, taxes receivable, all other non-monetary payables and receivables, etc.
The variable and constant item non-monetary economies in combination make up the non-monetary or real economy which together with the monetary economy constitute the SA economy.
Kindest regards,
Nicolaas Smith
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