A company uses the going concern convention when it is in a severe, near-bankrupt situation.

Question

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The going concern convention assumes that the company is financially stable and will continue to operate in the foreseeable future, so it would not be appropriate to apply this convention in a severe, near-bankrupt situation. In such a situation, the company may need to use different accounting conventions, such as the liquidation basis of accounting or the discontinuation basis of accounting.

A Company Uses the Going Concern Convention When It Is