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We all need to understand some element of accounting in our everyday transactions that involve money or its equivalent value whether this be domestic, leisure or business and we need to have some understanding of value and the way it changes
As it happens, money has evolved to become the standard by which value can be measured. Counting, as was once done, in terms of numbers of sheep, areas of land or pots of gold would not stand comparison in terms of value since in one case a starving person would set more value on a plate of food than on a few ounces of gold whilst the person who is well fed and prosperous places more value on that next million than increasing their stock of food
Either of the people described above will certainly view the value of a plot of land in terms of numbers of sheep differently, the hungry man will be reluctant to give up too many sheep whilst he would be willing to barter with his gold. Using comparative values where one sheep is worth an ounce of gold is fine so long as they both remain just as valuable but if there is a good season in the sheep rearing business and the demand does not grow at the same rate the sheep will have less value in order to try to adjust the balance between supply and demand. But here we are getting into economics which is another area of interest
However, the point is that there needs to be, within the same trading area some stable means of value by which business transactions can be made consistant. Cross border trading raises another question regarding currency exchange that has an impact on future values but as the 'trading world' gets smaller the major currencies, the US Dollar (USD) and the European ECU will be the ones that decide the value of the majority of trading transactions
In the United Kingdom just now we have chosen to stay with the Pound Sterling (£ or GBP) so for the time being we will use that as the currency for value comparisons within the United Kingdom whilst we would certainly need to convert our GBP to USD in most cases where we look at cross border values and such comparisions with be time dependent as the exchange rate varies day by day. When we adopt the ECU this site will translate all currency references and the section dealing with International Trading will have one less layer of currency conversion to explain !
Comments and suggestions for improving this site are appreciated and should be addressed to administration
Last Update 01-Mar-2010
Date first published 08-Nov-2005