GOING CONCERN CONCEPT:
This concept relates with the indefinite long economical life of the business. The assumption is that business will continue to exist for unlimited period unless of course it is dissolved due to some reason or the other. This is why in balance sheet, market price of fixed assets is not considered. When final accounts are prepared, record is made for outstanding expenses and prepaid expenses because of the assumption that business will continue. If the condition of business is depreciated to such an extent that it is to be closed down, even then accountant's concept is that business is to continue and he records all big and small transactions, he never stops making record on the possibility of closing down of business.
This is the best quality of accountant which is based on this concept of going concern.
In other words, According to this concept it is assumed that business will continue for an indefinite period of time.
Effects of this concept:
This concept relates with the indefinite long economical life of the business. The assumption is that business will continue to exist for unlimited period unless of course it is dissolved due to some reason or the other. This is why in balance sheet, market price of fixed assets is not considered. When final accounts are prepared, record is made for outstanding expenses and prepaid expenses because of the assumption that business will continue. If the condition of business is depreciated to such an extent that it is to be closed down, even then accountant's concept is that business is to continue and he records all big and small transactions, he never stops making record on the possibility of closing down of business.
This is the best quality of accountant which is based on this concept of going concern.
In other words, According to this concept it is assumed that business will continue for an indefinite period of time.
Effects of this concept:
- Working life of asset is taken into consideration for writing off depreciation because of this concept.
- Whatever bad position of the business may be, it does not affect on the accounting aspect of the business.
- Accountant always remains hopeful about continuity of business and he does not stop writing transactions even though the condition of business deteriorating.
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