[amp_mcq option1=”The entity continue running for forseeable future” option2=”The entity continue running until the end of accounting period” option3=”The entity will close its operation in 10 years” option4=”The entity can’t be liquidated” correct=”option1″]
The correct answer is: A. The entity continue running for forseeable future.
The going concern concept is a fundamental accounting principle that assumes that an entity will continue to operate for the foreseeable future. This means that the entity will not be liquidated or forced to cease operations in the near future. The going concern concept is important because it allows accountants to make assumptions about the future that are necessary to prepare financial statements. For example, accountants can assume that the entity will continue to use its existing assets and liabilities, and that it will be able to generate cash flow from its operations.
Option B is incorrect because it does not take into account the possibility that the entity may not continue to operate for the foreseeable future. Option C is incorrect because it is too specific. The going concern concept does not assume that the entity will continue to operate for a specific period of time, such as 10 years. Option D is incorrect because it is too restrictive. The going concern concept does not assume that the entity can never be liquidated.
In conclusion, the going concern concept assumes that an entity will continue to operate for the foreseeable future. This allows accountants to make assumptions about the future that are necessary to prepare financial statements.