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P2 C6 Conventions, Assumption. Concepts and Principles ofAccounting — Account STD 11 Commerce — Question

Gujarat BoardEnglish MediumSTD 11 CommerceAccountP2 C6 Conventions, Assumption. Concepts and Principles ofAccounting3 Marks
Question
Explain the concept of going concern giving example.
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Answer

Going concern concept is an important concept of accounting. When business is started, it is assumed that the same will continue for very long period in future and same will not closed in near future. Example: $(1)$ Fixed assets are shown in balance-sheet at cost less depreciation, not as market value. $(2)$ Prepaid revenue expenses are shown on the asset side of balance sheet. $(3)$ Deferred revenue expenses are sometimes shown on the asset side of balance sheet. $(4)$ Semi finished goods or work-in-progress is valued at cost incurred there on $(5)$ Financial statements are prepared at the end of accounting period. $(6)$ Distinction is made between 'capital expenditure' and 'revenue expenditure'.

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