Going Concern Convention of Accounting

According to this concept it is assumed that a company would continue to carry out its operations for a fairly long period of time and would not be liquidated in the near future. This is an important assumption of accounting as it provides the very basis for showing the value of assets in the balance sheet. Hence the significance of this concept is that the assets of the business are not valued at their liquidation value.

For example suppose if one has bought machinery for $60000 and depreciation on it is $12000 per year and its liquidation value is $5000 then at the end of the year it will be shown in the books of accounts as $48000(60000-12000) and not $5000 because of going concern concept

Hence the assumption regarding continuity of business allows to charge from the revenues for a particular period of the company only that part of the asset which has been consumed or used to earn that revenue in that period and carry forward the remaining amount to the next years, over the estimated life of the asset.

0 comments… add one

Leave a Comment

Related pages

economics traditional economynormal good inferior goodadvantages and disadvantages of international marketingsubstitute goods and complementary goodsbearer cheque and order cheque meanscommand economic system advantages and disadvantagesdisadvantages of deficit financingadvantages of zero based budgetingadvantages and disadvantages of capitalism and socialismexample of vertical mergerdefine durable goodbenefits of centrally planned economymerchant banking vs investment bankingmerits and demerits of social mediabenefits of devaluing currencyprivatization defmateriality concept in accountingcash in flowdeclining balance method depreciationwhat is trial balance & why it is preparedpublic goods pptthe main features of a capitalistic economic system aredisadvantages of cash managementmonopoly and oligopolytypes of accounts real nominal personalwhat are the advantages of barter systemjournal entry for outstanding salaryfullform of cfaunbilled revenue accounting treatmentadvantages and disadvantages of future contractsadvantages and disadvantages of debit card and credit cardabsolute advantage trade theoryadvantages and disadvantages of joint venturedifference between freight and carriageexamples of complementary goods in economicsadvantages of capitalist societyslr crradvantages of privatization of educationautocratic leadership businesswhat is a predeterminationadvantages of lifoexplain capmborder fence pros and consexamples of explicit costvertical analysis of financial statementtypes of elasticity of demand with diagramexamples of mixed economic systemcurrents assetsprofitabilty ratioglobalisation advantagesskimming pricing strategy examplewhat is a debenture loanwhat is the full form of tdsdebit the receiver and credit the giveradvantages and disadvantages of oligopoly competitiondirect quote fxadjusting entries for unearned revenuedisadvantages and advantages of mixed economywhat are the different types of factoringexample of conglomerate mergerdistinguish between joint venture and partnershipdisadvantages of carbon creditssubvention definitionfmcg fullformfreight means in hindidisadvantages of vertical integrationsupplementary goods and complementary goodsadvantages of monopoliessocialism advantages and disadvantagesgdr finance