Principle of Going Concern

   

Definition: the Principle of Going Concern is the fundamental accounting principle that assumes that a business (entity) is financially sound enough so that it will remain operational in the foreseeable future. In other words, it is the assumption that an entity will remain in business for the foreseeable future.
Put the other way, this means the entity will not be forced to halt operations and liquidate its assets in the near term at forced, low prices. By making this assumption, the company's accountant is justified in deferring the recognition of certain expenses until a later period, when the entity will presumably still be in business and using its assets in the most effective manner possible.


   
   

More on accounting and auditing: Accounting Cycle, Accounts Payable, Accounts Receivable, Accrued Revenue, Amortization, more...

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