Practicing Success
Which postulate assumes that the enterprise can sell its products/services in the future but the revenue is recognized at the time of the sale? |
Money measurement postulate Realisation postulate Going concern postulate Statement of profit and loss |
Realisation postulate |
Financial statements are based on fundamental assumptions known as postulates. One such postulate is the "going concern" assumption, which assumes that the enterprise will continue to operate and exist for an extended period. Consequently, assets are presented on a historical cost basis. Another essential postulate is the "money measurement" assumption, which presumes that the value of money remains stable across different time periods. Despite changes in purchasing power, assets acquired at various times are shown at their original cost. The "realization" postulate governs the preparation of the statement of profit and loss. It dictates that revenue should be recognized in the year when the sale occurred, even if the actual receipt of the sale price may happen over multiple years. These postulates form the foundation of financial reporting, contributing to the comparability and reliability of financial statements. |