The National Directory of Certified Public Accountants

Ask A CPA - Bookkeeping & Write-up

What Is The Realization Concept ?

The realization concept states that a accounting transaction takes place only for those economic events to which the entity is a party. This principle rules out recognizing a gain based on the appreciated market value of a still owned asset. A gain or loss on a marketable security occurs only when sold, not on the daily fluctuation of the share price.

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