Accounting Postulate

AAA

DEFINITION of 'Accounting Postulate'

A fundamental assumption in the field of accounting. Like any field, the present system of accounting has certain underlying axioms which form the basis of the all further work. Accounting postulates are generally very well agreed upon and form the foundation of the discipline.

INVESTOPEDIA EXPLAINS 'Accounting Postulate'

Accounting postulates include statements that economic activity conducted by certain identifiable entities will be continuous, that transactions occur at identifiable times and that the entity will continue as a going concern. None of these postulates are controversial, however they do highlight how difficulties can arise in advanced accounting practices.


For example, for certain transactions, there may be disagreement upon the timing for recording items of revenue and expense. In cases of mergers, there are certain issues with how to most accurately account for certain items. Guidelines must be developed for these advanced topics so that they fit within the accounting framework.

RELATED TERMS
  1. Accounting Method

    The method by which income and expenses are reported for taxation ...
  2. Financial Accounting Standards ...

    A seven-member independent board consisting of accounting professionals ...
  3. Accounting

    The systematic and comprehensive recording of financial transactions ...
  4. Accrual Accounting

    An accounting method that measures the performance and position ...
  5. Generally Accepted Accounting Principles ...

    The common set of accounting principles, standards and procedures ...
  6. Chart Of Accounts

    A listing of each account a company owns, along with the account ...
RELATED FAQS
  1. How do you calculate shareholder equity?

    Shareholders' equity is listed on a company's balance sheet and measures its net worth. A company's shareholders' equity ... Read Full Answer >>
  2. What is the difference between earnings and profit?

    Earnings, specifically retained earnings, and profit are often used as synonyms in corporate finance, although they are different ... Read Full Answer >>
  3. How is minimum transfer price calculated?

    A company that transfers goods between multiple divisions needs to establish a transfer price so that each division can track ... Read Full Answer >>
  4. What is the effective interest method of amortization?

    The effective interest method is an accounting practice used for discounting a bond. This method is used for bonds sold at ... Read Full Answer >>
  5. What does an unfavorable variance indicate to management?

    In managerial accounting, an unfavorable variance is discovered when a company's management performs a comparison between ... Read Full Answer >>
  6. Is there a way to include intangible assets in book-to-market ratio calculations?

    The book-to-market ratio is used in fundamental analysis to identify whether a company's securities are overvalued or undervalued. ... Read Full Answer >>
Related Articles
  1. Professionals

    Financial Career Options For Professionals

    Find out if spreading your wings to try a new career will make you soar or fall flat.
  2. Professionals

    Finding The Right Accounting Certification

    An accounting certification may be the boost your career needs. Find out how to get the most bang for your buck.
  3. Fundamental Analysis

    Spotting Creative Accounting On The Balance Sheet

    Companies have ways of manipulating their balance sheets that investors should be aware of.
  4. Professionals

    Examining A Career As An Auditor

    Stricter government regulations have put auditing professionals in demand.
  5. Options & Futures

    Mark-To-Market Mayhem

    Did this accounting convention contribute to the credit crisis of 2008? Find out here.
  6. Options & Futures

    Uncovering A Career In Forensic Accounting

    Does a job as a financial sleuth sound interesting to you? Dig in to learn more.
  7. Economics

    Calculating Net Realizable Value

    An asset’s net realizable value is the amount a company should expect to receive once it sells or disposes of that asset, minus costs from its disposal.
  8. Investing Basics

    Calculating Unlevered Free Cash Flow

    Unlevered free cash flow (UFCF) is the free cash flow of a business before interest payments.
  9. Taxes

    Understanding Write-Offs

    Write-off has different meanings depending on the context in which it is used, but generally refers to a reduction in value due to expense or loss.
  10. Economics

    What are Capital Goods?

    Capital goods are assets with a useful life of more than one year that are used for the production of income.

You May Also Like

Hot Definitions
  1. Radner Equilibrium

    A theory suggesting that if economic decision makers have unlimited computational capacity for choice among strategies, then ...
  2. Inbound Cash Flow

    Any currency that a company or individual receives through conducting a transaction with another party. Inbound cash flow ...
  3. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  4. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  5. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  6. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!