Question

The assumption that a business enterprise will not be sold or liquidated in the near future is known as ____________.

• A. economic entity
• B. conservatism
• C. periodicity
• D. going concern

Answer 1

The correct option is D going concern

The concept of going concern assumes that a business firm would continue to carry out its operations indefinitely, i.e. for a fairly long period of time and would not be liquidated in the foreseeable future.

This is an important assumption of accounting as it provides the very basis for showing the value of assets in the balance sheet.

Conversely, this means the entity will not be forced to halt operations and liquidate its assets in the near term at what may be low fire-sale prices.