Going concern is a basic underlying assumption in accounting. Explain why the going concern basis is...

Going concern is a basic underlying assumption in accounting. Explain why the going concern basis is important in understanding financial statement; Support your answer with evidences

Expert Solution

Going Concern Concept

The going concern concept of accounting implies that the business entity will continue its operations in the future and will not liquidate or be forced to discontinue operations due to any reason. A company is said to be a going concern if no evidence is available to believe that it will or will have to cease its operations in foreseeable future.

Importance :

The going concern concept of accounting is of great importance for accountants because if a company is a going concern, it must prepare its financial statements in accordance with applicable financial reporting framework such as generally accepted accounting principals applicable in United States of America (US-GAAP) and international financial reporting standards (IFRS).

The auditors conduct their own evaluation to see whether the going concern assumption is appropriate or not at the time of auditing financial statements even if the company claims to be a going concern.

ekkarill92 answered 5 months ago

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