Accounting postulate

An accounting postulate is a key assumption that underlies the practice of accounting. A postulate is derived from common historical practice, and is incorporated into the more formal accounting standards that govern how accounting transactions are recorded and presented. Examples of accounting postulates are:

  • Revenues are recognized when earned, and expenses are recognized when assets are consumed.
  • Once a business chooses to use a specific accounting method, it should continue using it on a go-forward basis.
  • The transactions of a business are to be kept separate from those of its owners.
  • Transactions should be recorded when not doing so might alter the decisions made by a reader of a company's financial statements.