Realisation: Difference between revisions
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'Realisation' refers to the conversion of assets, profits or losses into cash. | 'Realisation' refers to the conversion of assets, profits or losses into cash. | ||
Realisation can occur either on the receipt or payment of cash, or at an earlier time when such receipt or payment of cash becomes | Realisation can occur either on the receipt or payment of cash, or at an earlier time when such receipt or payment of cash becomes virtually certain. | ||
Generally accepted accounting practice allows the [[recognition]] of income and assets only when their realisation in the form of cash, or other assets that are readily realisable, can be assessed with reasonable certainty. | |||
The concept of realisation arose for the protection of the creditors of companies, to ensure that sufficient cash was available to distribute profits without a company or other entity becoming insolvent. | |||
Only realised profits may be distributed under company law. | |||
== See also == | == See also == | ||
*[[Accruals basis]] | *[[Accruals basis]] | ||
*[[Accumulated other comprehensive income]] | |||
*[[Cash]] | |||
*[[Contingent assets]] | |||
*[[Crystallisation]] | |||
*[[Distribution]] | |||
*[[Receivables]] | |||
*[[Recognition]] | *[[Recognition]] | ||
*[[Revaluation]] | |||
*[[Revenue]] | |||
*[[Unrealised profit]] | |||
*[[Work in progress]] | |||
[[Category:Accounting,_tax_and_regulation]] | |||
Latest revision as of 15:40, 20 July 2022
'Realisation' refers to the conversion of assets, profits or losses into cash.
Realisation can occur either on the receipt or payment of cash, or at an earlier time when such receipt or payment of cash becomes virtually certain.
Generally accepted accounting practice allows the recognition of income and assets only when their realisation in the form of cash, or other assets that are readily realisable, can be assessed with reasonable certainty.
The concept of realisation arose for the protection of the creditors of companies, to ensure that sufficient cash was available to distribute profits without a company or other entity becoming insolvent.
Only realised profits may be distributed under company law.
