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Which of the following statements defines the "Going Concern" concept correctly?

1. The organization has no significant liabilities at the end of the accounting period.
2. The organization will continue to operate its business for the foreseeable future.
3. The organization will cease its operations immediately after the balance sheet date.
4. The organization's assets must be recorded at their liquidation value.

Correct answer: The organization will continue to operate its business for the foreseeable future.

Solution

The going concern concept assumes that a business will continue operating for the foreseeable future and has no intention or need to liquidate. This assumption affects how assets and liabilities are valued in accounting.

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