Going Business Concept – PetsPedia

Going Business Concept

Auditors can analyze the entity’s financial statements and certain factors to determine whether the business should continue to use the going concern concept.
The concept of company performance is one of the fundamental concepts of accounting. Accountants using this concept assume that the business will stay in business indefinitely and stick to its current plans.
One of the benefits of this concept is that companies can spread the cost of an asset over its expected useful life, rather than accelerating spending in the current period.
To do this, the accountant assumes that the company will continue to meet its financial obligations using its existing assets.
By using this concept,  accountants do not anticipate a disruption of operations and liquidation of assets. Therefore, they postpone the expenses for a later period when the business will still be in service and in better shape to handle the additional expenses.
The concept of a going concern is not clearly defined when studying basic accounting principles. Therefore, many accountants and companies are unsure when an entity should start reporting on this type of theory.
If a company is hesitant to continue using the going concern concept, an auditor may be asked to analyze certain factors, such as negative trends in operating results, denial of commercial credit to the company by its suppliers and legal proceedings against the company.

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