What is a unit of account?

A unit of account is a measurement for the value that is divisible, fungible, and countable. Similar to how a unit of length such as a centimeter serves its purpose of measurement, the purpose of a unit of account is to provide an intuitive and measurable value to debt, tax, and goods and services.

Why is money a unit of account?

As a unit of account, money provides a common base for prices; it allows for the uniform expression of all prices, which facilitates the comparison of the value of things and simplifies the accounting process. In essence, it acts as a yardstick that measures the worth of goods and services against one another. Consider the market for smartphones.

Which currency is used as a unit of account?

Fiat currencies, such as the U.S. dollar or the Euro, are commonly used as units of account in modern economies. The unit of account function is distinct from the medium of exchange and store of value functions of money, though the three functions are often interrelated.