Unit of Account

A unit of account is a standard measure used to price goods, services, and assets so their value can be easily compared. Like how inches measure length, currencies such as the dollar or euro serve as units of account for economic value. This makes it straightforward for businesses and individuals to track prices, keep accounts, and perform financial analysis.

For historical comparisons, the Swiss Franc is sometimes preferred as a unit of account due to its stability over time—it tends to hold its value better than many other currencies. In international trade, parties may choose a stable currency, often the US dollar, as the common unit of account to avoid confusion.

A good unit of account needs to maintain consistent purchasing power. If a currency's value swings wildly, it becomes unreliable for recording prices or settling contracts. When prices or accounts are measured in a currency that keeps changing in value, it complicates transactions, accounting, and even tax calculations. Stability in the unit of account helps keep economic activity clear and fair.