Answer
The monetary unit presumption expects that the unit of measure (the dollar) remains sensibly steady so dollars of different years can be added with no alteration. At the point when the estimation of the dollar varies enormously after some time, the financial unit presumption loses its legitimacy.
The FASB in Concept No. 5 showed that it expects the dollar unadjusted for inflation or deflation to be utilized to quantify things perceived in budget reports. Just if conditions change drastically will the Board think about a more stable measurement unit.
Work Step by Step
Money fluctuates in value overtime, which decreases its purchasing power over the period. The monetary unit assumption, however, assumes that the value of the dollar remains fixed, which is an approximation.
