Continuity concept, Accounting Basics

Assignment Help:

Accounting supposes that the business as an accounting entity will continue to operate for a long time in the future, unless there is superior evidence to the contrary. The enterprise is seemed as a going concern, which is as continuing in operation, in any case in the foreseeable future. The owners have no purpose, nor have they the requirement to wind up or liquidate its operations.

This assumption is of considerable significance, for it implies that the business is looked as a mechanism for adding value to the resources it uses. The success of the business can be measured through the difference between output values as sales or revenues and input values as expenses. Thus, all unused resources can be reported at cost quite than at market values as, as per to the continuity concept, the future instead of selling them out rightly in the market.

The assumption about the business is not expected to be liquidated in the foreseeable future, actually establishes the basis for a lot of of the valuations and allocations in accounting. For illustration, depreciation or amortization procedures rest on this concept. This is this assumption that underlies the decision of investors to commit capital to enterprise. The notion holds that continuity of business activity is the sensible expectation for the business unit for that the accounting functions is being performed. Merely on the origin of this assumption can the accounting process continue stable and attain the objective of correctly recording and reporting on the capital invested, the position of the enterprise and the efficiency of management as a going concern. In this assumption neither liquidation values nor higher current market values are of particular importance in accounting. This assumption gives a origin for the application of cost in accounting for assets.

Though, if the accountant has good reasons to believe that the business, or a few part of it, is going to be liquidated, or which it will cease to operate as like in a year or two, then the resources could be reported on their recent values or liquidation values.


Related Discussions:- Continuity concept

Prepare financial statements, Accounting information systems' output is req...

Accounting information systems' output is required by external and internal users for decision making. you are required to use the following trial balance to prepare financial stat

What is matching principle, Q. What is matching principle? Expense reco...

Q. What is matching principle? Expense recognition is closely related to as well as sometimes discussed as part of the revenue recognition principle. The matching principle sta

Can you explain about liabilities, Q. Can you explain about Liabilities? ...

Q. Can you explain about Liabilities? Liabilities -- amounts owed by a company to others. Current liabilities are those amounts duewithin one year or less and generally include

An accounting perspective business insight, An accounting perspective Busin...

An accounting perspective Business insight Accounting is essential for all three types of business organizations and every company must follow generally accepted accounting pri

Show recording changes in assets, Q. Show Recording changes in assets? ...

Q. Show Recording changes in assets? Recording changes in assets, liabilities, and stockholders' equity While recording commerce transactions remember that the foundation of

Computer average stock, 1. The closing stock of Prince Corporation has been...

1. The closing stock of Prince Corporation has been reduced by $8,000 from its opening amount of $22,000. 2. No dividend has been paid or proposed by the company. 3. The only cap

Tds, how we can do tds audit

how we can do tds audit

What are adjusting entries, Q. What are adjusting entries? When you sta...

Q. What are adjusting entries? When you start to analyze business transactions you saw that the evidence of the transaction is typically a source document. It is any printed or

Recording, does immaterial items have to be recorded

does immaterial items have to be recorded

Account, #quthe books of deven verma could not be tallied.the accountant tr...

#quthe books of deven verma could not be tallied.the accountant transferred the difference of Rs.1270 in the suspense account on the debit side the following mistakes were found la

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd