Management And Accounting Web

Moonitz, M. 1961. The Basic Postulates of Accounting. Accounting Research Study No. 1. AICPA.

Note by James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida

Accounting Theory Main Page  |  Financial Reporting Main Page

Note: The following includes the Contents of the Research Study, additional quoted explanations for each of the fourteen basic accounting postulates, and some links for more information, including one to the full text of the document.

Chapter 1: Introduction - Page 1

The Problem
The Approach
The Principle of Selection
The Problem of Method

Chapter 2: The Environment of Accounting - Page 8

Economic Activity
Quantitative Data
Predictability
Characteristics of Economic Organization
Wealth and Welfare
Wealth and Assets
The Accounting Entity
The Nonprofit Area
Income Measurements and Position Statements
Accounting Periods
The Unit of Account
Value in Exchange
Historical Example

Chapter 3: Accounting Postulates - The Environment - Page 21

Postulate A-1. Quantification - Quantitative data are helpful in making rational economic decisions.

Postulate A-2. Exchange - Most of the goods and services that are produced are distributed through exchange, and are not directly consumed by the producers.

Postulate A-3. Entities - Economic activity is carried on through specific units or entities.

Postulate A-4. Time Period - Economic activity is carried on during specifiable periods of time.

Postulate A-5. Unit of Measure - Money is the common denominator in terms of which the exchangeability of goods and services, including labor, natural resources, and capital, are measured.

Definition of Accounting - The function of accounting is

1. to measure the resources held by specific entities;

2. to reflect the claims against and the interest in those entities;

3. to measure the changes in those resources, claims, and interest;

4. to assign the changes to specifiable periods of time; and

5. to express the foregoing in terms of money as a common denominator.

Chapter 4: Supplementary Propositions - The Field of Accounting - Page 25

Arbitrary Conditions
Implied Conditions
Rational Decisions
Financial Statements
Market Prices and "Cost"
Accounting Entities and Uniformity
Time and Uncertainty
Summary:

Postulate B-1. Financial Statements - The results of the accounting process are expressed in a set of fundamentally related financial statements which articulate with each other and rest upon the same underlying data.

Postulate B-2. Market Prices - Accounting data re based on prices generated by past, present, or future exchanges which have actually taken place or are expected to.

Postulate B-3. Entities - The results of the accounting prices are expressed in terms of specific units or entities.

Postulate B-4. Tentativeness - The results of operations for relatively short periods of time are tentative whenever allocations between past, present, and future periods are required.

Chapter 5: A Third Set of Propositions - The Imperatives - Page 38

Continuity or Going Concern
Accounts Receivable
Inventories
Buildings and Equipment
Liabilities
Objectivity
Consistency
The Monetary Unit
Materiality and Conservatism
Disclosure
Summary:

Postulate C-1. Continuity - In the absence of evidence to the contrary, the entity should be viewed as remaining in operation indefinitely.

Postulate C-2. Objectivity - Changes in assets and liabilities, and the related effects (if any) on revenues, expenses, retained earnings, and the like, should not be given formal recognition in the accounts earlier than the point of time at which they can be measured in objective terms.

Postulate C-3. Consistency - The procedures used in accounting for a given entity should be appropriate for the measurement of its position and its activities and should be followed consistently from period to period.

Postulate C-4. Stable Unit - Accounting reports should be based on a stable measuring unit.

Postulate C-5. Disclosure - Accounting reports should disclose that which is necessary to make them not misleading.

Chapter 6: Summary, Conclusions and Recommendations Prospectus - Page 51

Summary
Conclusions and Recommendations
Prospectus

Comments of Leonard Spacek - Page 56

Selected Bibliography - Page 58

_____________________________________________

Related Links

Chatfield, M. 1992. Review: Selected Writing by Maurice Moonitz. The Accounting Historians Journal 19(2): 189-191.

Hathi Trust Digital Library: Moonitz, M. 1961. The Basic Postulates of Accounting Babel

Staubus, G. J. 2010. Maurice Moonitz: The consummate professional. Accounting Horizons (December): 703-712. (Includes a discussion of Moonitz. 1961. The Basic Postulates of Accounting). AAAjournals