Multiple choice

The going concern concept is the underlying basis for

  1. stating fixed assets at their realisable values

  2. disclosing the market value of securities

  3. disclosing the sales and other operating information in the income statement

  4. none of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The going concern concept assumes the business will continue operating indefinitely rather than being liquidated. This is the FUNDAMENTAL basis for: (1) Stating fixed assets at book value (historical cost less depreciation) rather than break-up value, (2) Allocating costs over time through depreciation, (3) Following accrual accounting, and (4) Carrying assets at historical cost. Options A, B, and C all describe alternative valuation bases (realisable value, market value) or outputs (income statement) that are NOT the underlying basis of going concern. Since none of A, B, or C represent the going concern concept, D is correct.

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