The going concern principle is the assumption that a business will continue to exist in the near future, in other words, that it will not liquidate or be forced out of business. Stay on top of your financial activity by using an online invoicing software such as Debitoor. Sign up now! As an
accounting principle, the going concern principle serves as a guideline which allows readers of a business’s financial statements to assume that the business will continue to operate long enough to carry out its current obligations, objectives and commitments. Going concern is an important part of the generally accepted accounting principles. Without it, businesses would not be able to perform accrued or prepaid expenses.The going concern principle allows a business to defer some of their
prepaid expenses to future accounting periods, rather than recognising them all at once. Think about this: If we assume that a business will not be able to operate in the foreseeable future then why would we prepay or accrue anything? Well, if we assume the business might not operate long enough to realize these future expenses, then we would not prepay or accrue anything. The going concern principle provides some justification for accountants to follow the cost principle. If a company is a going concern, it has no intention to liquidate, so why should it report the current value of its long term
assets? Yet, if the value of an asset has been damaged or weakened, then the carrying amount of the asset could be reduced to an amount lower than its carrying value. An example showing the application of the going concern principle is the calculation of depreciation of assets. This depreciation calculation is based on the expected economic life
of the asset, as opposed to its current market value. Businesses assume that they will continue operating for an indefinite period of time, and that their assets will therefore be used in the business until they have fully depreciated. The significance of accounting principlesAccounting principles serve a significant purpose of standardising the way in which businesses perform their financial reporting activities. It is important for all businesses to keep track of their financial statements, and ensure that they are correctly and efficiently drawn up. With Debitoor invoicing software you can instantly extract and download your financial statements at any point in time! Johnny's Car Repair Shop started the year with total assets of $60,000 and total liabilities of $40,000. During the year the business recorded $100,000 in car repair revenues, $55,000 in expenses, and dividends of $10,000. The net income reported by Johnny's Car Repair Shop for the year was_____. a. $35,000 b. $45,000 c. $20,000 d. $90,000 e. none of the options listed If beginning capital was $25,000, ending capital is $37,000, and the owner's withdrawals were $23,000, the amount of net income or net loss for the period was: a. net loss of $35,000 b. net income of $35,000 c. net income of $14,000 d. net loss of $14,000 e. none of the options listed 3-14Test Bank for Survey of Accounting, First Editionc.is in a growth industry.d.will remain in operation for the foreseeable future.Ans: D, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA FC: Measurement, IMA: Reporting87.The economic entity assumption states that economic events Get answer to your question and much more 88.The concept that a business has a reasonable expectation of remaining in business forthe foreseeable future is called thea.economic entity assumption.b.monetary unit assumption.c.periodicity assumption.d.going concern assumption.Ans: D, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA FC: Measurement, IMA: Reporting 89.Which of the following isnotan accounting assumption? Get answer to your question and much more 90.The periodicity assumption states that Get answer to your question and much more Which accounting principle assumes that a business will continue for a long time?Key Takeaways. Going concern is an accounting term for a company that is financially stable enough to meet its obligations and continue its business for the foreseeable future.
What are the 3 assumptions of accounting?The three main assumptions we will deal with are – going concern, consistency, and accrual basis.
What are the four assumptions of accounting?There are four basic assumptions of financial accounting: (1) economic entity, (2) fiscal period, (3) going concern, and (4) stable dollar. These assumptions are important because they form the building blocks on which financial accounting measurement is based.
What is going concern assumption?The going concern assumption is that a business will remain active for the foreseeable future.
|
Which accounting assumption assumes that an enterprise will continue in operation long enough to carry out its existing objectives and commitments?
zusammenhängende Posts
Urheberrechte © © 2024 ketiadaan Inc.
