# Nonmonetary vs. Monetary Assets: Key Differences Explained

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## What Are Nonmonetary Assets?

Nonmonetary assets appear on the [balance sheet](https://www.investopedia.com/terms/b/balancesheet.asp) but are not easy to convert into cash. They are items a company holds without a precise dollar value. The value of these [assets](https://www.investopedia.com/terms/a/asset.asp) can change a lot over time. A company may need to change its nonmonetary assets as the assets wear out or become obsolete. Examples include factory equipment and vehicles.

### Key Takeaways

*   Nonmonetary assets cannot be precisely valued in dollars and is not easily convertible into cash, with examples including factory equipment and intellectual property.  
    
*   Monetary assets are cash or can be quickly converted to cash for a fixed amount, examples being bank deposits and accounts receivable.  
    
*   Nonmonetary assets are classified as either tangible, like property, or intangible, like patents, and their dollar value can fluctuate due to market conditions.  
    
*   The distinction between monetary and nonmonetary assets generally hinges on how easily and quickly the asset can be converted into cash.  
    
*   Understanding the difference between monetary and nonmonetary assets is crucial for accurate financial reporting and strategic company resource management.

## Nonmonetary vs. Monetary Assets: Key Differences

Nonmonetary assets are distinct from monetary assets. Monetary assets include cash and cash equivalents, such as cash on hand, bank deposits, investment accounts, [accounts receivable](https://www.investopedia.com/terms/a/accountsreceivable.asp) (AR), and notes receivable, all of which can readily be converted into a fixed or precisely determinable amount of money.

Nonmonetary assets can't be converted into cash at a fixed rate. Typical nonmonetary assets include tangible and intangible assets. [Tangible assets](https://www.investopedia.com/terms/t/tangibleasset.asp) have a physical form and are the most basic types of assets listed on a company's balance sheet. Examples of tangible assets include a company's inventory and [property, plant, and equipment](https://www.investopedia.com/terms/p/ppe.asp) (PP&E).

In contrast, [intangible assets](https://www.investopedia.com/terms/i/intangibleasset.asp) are not physical in nature. Companies can acquire or create intangible assets. Examples include copyrights, patents, trademarks, brand recognition, and [goodwill](https://www.investopedia.com/terms/g/goodwill.asp).

## Factors Influencing Asset Classification

It's not always clear if an asset is monetary or nonmonetary. The key factor is whether the asset can quickly convert into cash or a cash equivalent.

If it can be converted into cash easily, the asset is considered a monetary asset. [Liquid assets](https://www.investopedia.com/terms/l/liquidasset.asp) are assets that can easily be converted into cash in a short amount of time. If it cannot be readily converted to cash or a [cash equivalent](https://www.investopedia.com/terms/c/cashequivalents.asp) in the short term, then it is considered a nonmonetary asset.

## Comparing Nonmonetary Assets and Liabilities

In addition to nonmonetary assets, companies also commonly have nonmonetary [liabilities](https://www.investopedia.com/terms/l/liability.asp). Nonmonetary liabilities include obligations that cannot be met in the form of cash payments, such as a warranty service on goods a company sells. It is possible to determine the dollar value of such a liability, but the liability represents a service obligation rather than a financial obligation such as interest payments on a loan.

## Understanding Value Fluctuations in Asset Types

Dollar values are the accepted measure for quantifying a company's assets and liabilities as they are presented in a company's [financial statements](https://www.investopedia.com/terms/f/financial-statements.asp). However, nonmonetary assets and liabilities that cannot be readily converted to cash are also included in a company's balance sheet. Common examples of nonmonetary assets are the [real estate](https://www.investopedia.com/terms/r/realestate.asp) a company owns where its offices or a manufacturing facility are located, and intangibles such as proprietary technology or other intellectual property.

These items are undeniably assets, but their current value is not always apparent as it changes over time in accordance with economic and market conditions and forces. For example, marketplace competition changes the dollar value of a company's inventory as the company adjusts its market price in response to price competition from other companies or to the demand for the company's products. General economic forces such as inflation or [deflation](https://www.investopedia.com/terms/d/deflation.asp) also impact the value of nonmonetary assets such as inventory or manufacturing facilities.

Most nonmonetary assets are recorded on the balance sheet at the amount the company paid for them, or for longer-term assets, what the company paid less any accumulated depreciation. This means that even when market values fluctuate, it does not affect the values in the financial statements. The only time the values would be affected is if the market values decline below what was originally paid. In this case, the company lowers the value of the asset by "writing off" the asset.

A company can use its monetary assets to fund [capital improvements](https://www.investopedia.com/terms/c/capitalimprovement.asp) or to pay for day-to-day operational expenses. A company will use its nonmonetary assets to help generate revenue. For example, a company can use its factory and equipment to produce the products it will sell to its customers.