The accounting principle that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold, unless evidenceshows that it will not continue, is the:
A)Revenue recognition principle.
B)Cost principle.
C)Going concern principle.
D)Monetary unit principle.
E)Business entity principle.

Question

Quizplus · Accepted Answer

The going concern principle assumes that the entity will continue to operate for the foreseeable future, which allows financial statements to report assets at their full value and avoid understating liabilities. This assumption is important because without it, financial statements would need to reflect the company's liquidation value, which could be significantly lower than its current value as a going concern.

The Accounting Principle That Requires Financial Statements to Reflect the Assumption