The monetary unit assumption requires that companies include in the accounting records only transaction data that can be expressed in terms of money. This assumption enables accounting to quantify (measure) economic events, the monetary unit assumption is vital to applying the cost principle.
This assumption prevents the inclusion of some relevant information in the accounting records. For example, the health of the owner, the quality of service, and the morale of employees are not included. The reason: Companies cannot quantify this 8nformation in terms of money. Though this information is important, only events that can be measured in money are recorded.