In accounting for tangible operational assets, the continuity assumption is important because of which of the following?
A) It helps a company decide whether to use straight-line depreciation or an accelerated depreciation method.
B) It justiﬁes depreciating the asset over its expected useful life, without anticipating that the business will liquidate in the near future.
C) It provides justiﬁcation for including residual values in calculating depreciation.
D) It is consistent with maintaining assets in the accounting records at market value rather than acquisition cost.

Question

Quizplus · Accepted Answer

The continuity assumption, also known as the going concern assumption, implies that the business will continue operating in the foreseeable future, which justifies spreading the cost of an asset over its useful life through depreciation, without the need to consider liquidation values.

In Accounting for Tangible Operational Assets, the Continuity Assumption Is