Going concern concept

The going concern concept states that all records are made on the assumption that the business will continue for foreseeable future. Unless it is known that the business will close down at a determinable time, all transactions are recorded in the routine manner and there is no need for any special valuation or adjustment.

However, if it is known that a business will close down in say next two or three months, it would be more appropriate to state its assets not at cost but at the value at which these can be sold on closure of the business. At that stage, it may also be necessary to take account of all legal obligations that may not have been previously brought to books.

Unless, it is categorically stated otherwise, all accounting records and income statement or balance sheets are prepared on the assumption that the business will continue to function for an indefinite future period.

Prev page
Next page

Leave a comment