Question

The going concern assumption implies that: 1. a firm will continue to be in business for the foreseeable future. 2. a firm will be going out of business in the near future. 3. a firm will continue to operate in the near future, but only after being acquired by another firm. 4. none of these.

Answer 1

Answer:

A firm will continue to be in business for the foreseeable future (A)

Explanation:

According to the accounting concept, a firm is a going concern if its financial statement (i.e Income Statement, Cash flow Statement and Statement of financial position ) and other relevant indicators show that it has the ability to continue in the business in the next 12 months (foreseeable future) and there is no intention to shut-down .

However, if there are indicators that show that the firm can't continue in the operation for the next 12 months, its financial statement should be prepared on break-up basis.