Question

The rule that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold, unless evidence shows that it will not continue, is the: A. Cost Principle. B. Going-concern assumption. C. Objectivity principle. D. Monetary unit assumption. E. Business entity assumption.

Answer 1

Answer:

B. Going-concern assumption.

Explanation:

The financial statements are normally prepared on the assumption that an entity is a going concern and will continue in operation for a foreseeable future. Hence, It is assumed that the entity has neither the intention nor the need to liquidate or curtail materially the scale of its operations. If such an intention or need exists, the financial statements have to be prepared on different a basis and , if so , the basis used is disclosed.