ACCA FA · Chapter 2 · Question 5 of 10
Financial statements are normally prepared on the assumption that the entity is a going concern. What does this mean?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) The entity will continue in operation for the foreseeable future
Explanation
The going concern assumption is that the entity has neither the intention nor the need to liquidate or significantly curtail its operations, so it will continue in operation for the foreseeable future. This is why assets are normally carried at cost-based amounts rather than break-up values. It does not guarantee future profits or immediate liquidity.
More The qualitative characteristics of financial information MCQs
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- Q8How does the IASB Conceptual Framework define a liability?
- Q9Which of the following would meet the Conceptual Framework definition of an asset of a trading company?
- Q10Which of the following is NOT income as defined in the Conceptual Framework?
- Q1Which TWO qualitative characteristics are identified as fundamental in the IASB Conceptual Framework?