Why it is necessary for accountants to assume that a business entity will remain a going concern?

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Solution

The concept of going concern assumes that a business firm would continue to carry out its operations indefinitely. Due to this concept distinction is made between capital and revenue expenditure and thus, assets and liabilities are recognised.

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Why is it necessary for accountants to assume that business entity will remain a going concern?

The concept that assumes that a business would survive for an infinite time is called 'Going concern'.

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