6 Questions
True or false: The Going Concern concept assumes that a business enterprise will cease to exist in the near future.
False
True or false: The Going Concern concept is not concerned with the continuity of a business enterprise.
False
True or false: The Going Concern concept assumes that a business enterprise will continue in existence for a long period of time.
True
What is the primary assumption of the Going Concern concept?
The business enterprise will continue in existence for a long enough period of time to carry out its objectives and commitments
What does the Going Concern concept assume about the life of a business enterprise?
The life is indefinite
Why is the Going Concern concept important for financial reporting?
It ensures that financial statements are prepared with the assumption that the business will continue operating
Study Notes
Going Concern Concept
- The Going Concern concept assumes that a business enterprise will continue in existence for a long period of time.
- This concept is concerned with the continuity of a business enterprise.
- The primary assumption of the Going Concern concept is that a business will continue to operate for a foreseeable future.
- The Going Concern concept assumes that a business enterprise will have a long life, rather than ceasing to exist in the near future.
- This concept is important for financial reporting because it allows companies to prepare financial statements on the basis that they will remain in operation, rather than liquidating their assets.
Test your understanding of the going concern concept with this quiz. Assess your knowledge of the assumption that a business will continue to operate for an indefinite period, fulfilling its objectives and obligations.
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