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Going Concern Concept Video Lecture | Accountancy Class 11 - Commerce

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FAQs on Going Concern Concept Video Lecture - Accountancy Class 11 - Commerce

1. What is the going concern concept in accounting?
Ans. The going concern concept is an accounting principle that assumes a company will continue to operate indefinitely and will not be liquidated in the near future. This concept influences how financial statements are prepared, as it assumes that assets will be used up or sold and liabilities will be settled in the normal course of business.
2. How does the going concern concept affect financial statements?
Ans. The going concern concept affects financial statements by assuming that the company will continue its operations. This means that assets are reported at their historical cost or fair value, rather than at liquidation value. Additionally, the concept requires the disclosure of any significant uncertainties that may cast doubt on the company's ability to continue as a going concern.
3. What factors indicate the need to consider the going concern concept?
Ans. Several factors indicate the need to consider the going concern concept. These include recurring operating losses, negative cash flows, legal proceedings, loan defaults, and the inability to pay creditors. If any of these factors suggest that the company may not be able to continue as a going concern, additional disclosures and adjustments may be required in the financial statements.
4. What happens if a company is not considered a going concern?
Ans. If a company is not considered a going concern, it may have significant implications for its financial statements. In such cases, the assets may need to be reported at their liquidation value rather than historical cost or fair value. Additionally, the company may need to disclose its plans for liquidation or discontinuation of operations.
5. How does the going concern concept impact financial statement users?
Ans. The going concern concept is important for financial statement users, such as investors, lenders, and shareholders, as it provides assurance about the future viability and stability of a company. By assuming that the company will continue its operations, financial statement users can make more informed decisions regarding investments, loans, and other financial transactions.
123 videos|135 docs|51 tests

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