What is Going Concern?

Going concern is that the basic underlying assumption of accounting. Financial statements are prepared to assume that the business may be a going concern i.e. the company intends to continue the business and will be able to do so. In short, it means the business will continue indefinitely.

The business will continue operating and will not close but will realize assets and discharge liabilities within the normal course of operations.

Examples

A nationalized company is in income problems but the govt of the country provided a guarantee to the corporate to assist it out with all payments, the company may be a going concern despite the poor financial position.

An insurance firm is in serious financial troubles and therefore the government isn’t willing to bail it out. The Board of Directors has passed a resolution to liquidate the business. The insurance firm isn’t a going concern.

An oil and gas firm operating in Sudan is stopped by a Sudanese court from carrying out operations in Sudan. The firm isn’t a going concern in Sudan, because it has to shut down.

a producing company features a current ratio below 0.5. A creditor of $1,000,000 demanded payment which the company could not make. The creditor requested the court to liquidate the business and recover his debts and therefore the court grants the order. the corporate is not any longer a going concern.


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Accounting Principles

According to The American Institute of Certified Public Accountants “Principles of Accounting are the overall law or rule adopted or proposed as a guide to action, a settled ground or basis of conduct or practice”

Basic Accounting Terms

After going through this lesson, you will be ready to understand the ‘Basic Accounting Terms’ that we commonly use in Accountancy.

3 Fundamental Accounting Assumptions

After browsing this lesson, you shall be ready to understand the subsequent Fundamental Accounting Assumptions: Going Concern, Consistency, Accrual

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