Introduction
According
to Webster’s Third New International Dictionary, the most relevant definition s
of postulates appear to be:
to Webster’s Third New International Dictionary, the most relevant definition s
of postulates appear to be:
(1) a proposition advanced with the claim that
it be taken for granted or as axiomatic.
it be taken for granted or as axiomatic.
(2) an underlying hypothesis or assumption.
The first
of these definitions refers to statements which are assumed to be generally
accepted but the validity of which is necessary for the acceptance of other
postulates or general principles, standards or procedures.
of these definitions refers to statements which are assumed to be generally
accepted but the validity of which is necessary for the acceptance of other
postulates or general principles, standards or procedures.
Even
though such a postulate s general, however, it may be falsifiable upon further
investigation or found to be irrelevant to further development of accounting
thought. The second definition of a
“postulate” refers to a hypothesis that is a yet unproven and may, in fact, not
require proof if it leads to relevant ideas and a logical development of
thought and useful conclusions.
though such a postulate s general, however, it may be falsifiable upon further
investigation or found to be irrelevant to further development of accounting
thought. The second definition of a
“postulate” refers to a hypothesis that is a yet unproven and may, in fact, not
require proof if it leads to relevant ideas and a logical development of
thought and useful conclusions.
In
summary, therefore, postulates are basic assumptions or fundamental
propositions concerning the economic, political and sociological environment in
which accounting must operate. The basic criteria are that:-
summary, therefore, postulates are basic assumptions or fundamental
propositions concerning the economic, political and sociological environment in
which accounting must operate. The basic criteria are that:-
1. They must be relevant to the
development of accounting logic, that is, they either being true or providing a
useful starting point as an assumption in the development of accounting logic.
development of accounting logic, that is, they either being true or providing a
useful starting point as an assumption in the development of accounting logic.
2. They must be accepted as valid by the
discussion as either being true or providing a useful starting point as an
assumption in the development of accounting logic. It is not necessary that the
postulates be true or even realistic.
discussion as either being true or providing a useful starting point as an
assumption in the development of accounting logic. It is not necessary that the
postulates be true or even realistic.
Example of Postulates
Examples
of accounting postulates are going concern-business operations is assumed to
exist for a long time, entity-the business is assumed to have an identity of
itself.
of accounting postulates are going concern-business operations is assumed to
exist for a long time, entity-the business is assumed to have an identity of
itself.
For
economist, the assumptions that the there exists a perfectly competitive
society has never been true, but it has provided useful insights into the
working of the economic system. On the other hand, an assumption of a
monopolistic society leads to different conclusions that may also be useful in
an evaluation of the economy.
economist, the assumptions that the there exists a perfectly competitive
society has never been true, but it has provided useful insights into the
working of the economic system. On the other hand, an assumption of a
monopolistic society leads to different conclusions that may also be useful in
an evaluation of the economy.
It should
be noted that the assumption that provide the greatest degree of prediction may
be more useful than those that are most realistic.
be noted that the assumption that provide the greatest degree of prediction may
be more useful than those that are most realistic.
Criticisms of the Postulation Approach
One of
the major criticisms of the postulation approach is that if postulates are
stated broadly enough to secure general agreement, they can likely serve as a
basis for many further propositions and thus they do not necessary support a
single set of logical propositions.
the major criticisms of the postulation approach is that if postulates are
stated broadly enough to secure general agreement, they can likely serve as a
basis for many further propositions and thus they do not necessary support a
single set of logical propositions.
On the
other hand, if they are stated specifically as to lead to specific
propositions, they are likely to fail in gaining general agreement. And since
most postulates of this type cannot be tested, there is no way of testing
alternative sets of propositions by testing the validity of the postulates.
other hand, if they are stated specifically as to lead to specific
propositions, they are likely to fail in gaining general agreement. And since
most postulates of this type cannot be tested, there is no way of testing
alternative sets of propositions by testing the validity of the postulates.
Furthermore,
it can be argued that postulates are frequently formulated with the objectives
of supporting preconceived propositions rather than using the postulates to
drive the further propositions.
it can be argued that postulates are frequently formulated with the objectives
of supporting preconceived propositions rather than using the postulates to
drive the further propositions.
Environmental Postulates
The
environment of accounting has a direct bearing on the objectives of accounting
and on the logical derivation of principles and rules. But not all aspects of
society are relevant to accounting. Some are clearly irrelevant. Others are
only indirectly relevant, and many economic, social and political aspects are
directly relevant. What may be relevant at one period may be irrelevant at
another vice versa. For example, international trade and the international balance
of payment may be more significant for many firms today than in an earlier
period.
environment of accounting has a direct bearing on the objectives of accounting
and on the logical derivation of principles and rules. But not all aspects of
society are relevant to accounting. Some are clearly irrelevant. Others are
only indirectly relevant, and many economic, social and political aspects are
directly relevant. What may be relevant at one period may be irrelevant at
another vice versa. For example, international trade and the international balance
of payment may be more significant for many firms today than in an earlier
period.
Most
statements of environmental postulates include an assumption that exchanges in
the economy take place in markets and those market prices have significance for
accounting. However, there is agreement regarding which prices are relevant.
Moonitz, for example, states that accounting data are based on price generated
by past, present or future exchanges which have actually taken place or are
expected to.
statements of environmental postulates include an assumption that exchanges in
the economy take place in markets and those market prices have significance for
accounting. However, there is agreement regarding which prices are relevant.
Moonitz, for example, states that accounting data are based on price generated
by past, present or future exchanges which have actually taken place or are
expected to.
Chambers
on the other hand, states “as a postulate that the domain of accounting is the
range of retrospective and contemporary measurements and calculations”. Thus,
chambers rejects expected prices while Moonitz would include them.
on the other hand, states “as a postulate that the domain of accounting is the
range of retrospective and contemporary measurements and calculations”. Thus,
chambers rejects expected prices while Moonitz would include them.
Other
environmental postulates relate to assumptions regarding the behavior of the
user of accounting information. Chambers, for example, states a number of
postulates relating to the behavior and beliefs of individuals.
environmental postulates relate to assumptions regarding the behavior of the
user of accounting information. Chambers, for example, states a number of
postulates relating to the behavior and beliefs of individuals.
Other
frequently stated postulates to the accounting entity, the measurement process,
or objectives of accounting.
frequently stated postulates to the accounting entity, the measurement process,
or objectives of accounting.
Conclusion
Postulates
basic assumptions or fundamental propositions concerning the economic,
political and sociological environment in which accounting must operate.
basic assumptions or fundamental propositions concerning the economic,
political and sociological environment in which accounting must operate.
Example
of accounting postulates are going concern, entity, accounting objectives et
cetera.
of accounting postulates are going concern, entity, accounting objectives et
cetera.
There are
many criticisms of the postulation approach. One of criticisms is that its main
purpose is to support preconceived propositions.
many criticisms of the postulation approach. One of criticisms is that its main
purpose is to support preconceived propositions.
The
environment in which accounting operate has direct impact on accounting
objectives.
environment in which accounting operate has direct impact on accounting
objectives.