Multiple choice

In which of the following cases is the 'going concern' concept applied?

  1. When an enterprise is set up for a particular purpose, which should be achieved shortly.

  2. When a receiver or liquidator has been appointed in case of liquidation of a company, which is to be liquidated.

  3. Fixed assets are acquired for use in the business for earning revenues and are not meant for resale.

  4. When an enterprise is declared sick.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The going concern concept applies when a business is expected to continue operating indefinitely, making it appropriate to acquire fixed assets for long-term use in revenue generation (Option C). Options A, B, and D describe situations where the going concern assumption is NOT applicable - short-term ventures, liquidation scenarios, and financially distressed enterprises respectively.

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