ACCOUNTING CONCEPTS 3: GOING CONCERN

Financial Statements of a business (corporation and small business) or of an individual or household (personal finance) assume that the enterprise or activity will continue for as long as envisioned objectives and plans are to be achieved. Also, there are contracts and commitments implied in the financial statements which must be fulfilled.

Financial Statements assume that the enterprise or activity will not suddenly cease.

Because an enterprise or an economic activity is assumed to be a going concern, assets of the business or the individual / household are valued in the financial statements (the Balance Sheet) at historical cost, and not at their market value or the cost of their replacement.