GOING CONCERN ACCOUNTING PRINCIPLES

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All about accounting :- 12th blog

              *****ACCOUNTING*****

Hi freinds 🙏.,
           Today's discuss 7th accounting principles...

 So let's discuss...

  ★ GOING CONCERN :-
The going concern concept is a fundamental principle of accounting. It assumes that during and beyond the next fiscal period a company will complete its current plans, use its existing assets and continue to meet its financial obligations.
                     A going concern is a business that is assumed will meet its financial obligations when they fall due. ... Hence, a declaration of going concern means that the business has neither the intention nor the need to liquidate or to materially curtail the scale of its operations.
           A going concern is a business that has sufficient financial wherewithal and momentum to continue its normal operations into the future and would be able to absorb a bad turn of events without having to default on its liabilities.
           
  * How to assess going concern ?
1. Current ratio: Divide current assets by current liabilities to get the current ratio. 

2. Debt ratio: Total liabilities divided by total assets provides the company's debt ratio.

3. Net income to net sales: This ratio measures how well the company is managing its expenses.

  * Opposite of going concern :-
Going concern refers to the assumption that a company has the resources to continue operating in the foreseeable future. A bankrupt company or a company near bankruptcy is the opposite of a going concern.

  * Going concern value :-
Within business valuation, Going Concern Value is the value of a business that is expected to continue operating into the future (as opposed to being liquidated for its assets). Within real estate appraisal, Going Concern Value is commonly referred to the total value of the real estate plus the business operation.

   * Importance of going concern :- 
Going concern is an important part of the generally accepted accounting principles. ... The going concern principle allows a business to defer some of their prepaid expenses to future accounting periods, rather than recognising them all at once.

   * Example of going concern :- 
ABCD PVT. LTD. company is unable to make payments to its creditors due to a very weak liquidity position. The court grants the order of liquidating the company upon the request of one of the company’s creditors. The company is no longer a going concern because sufficient evidence is available to believe that the company cannot continue its operations in future.


★Remaining 6 principles discuss in 13th blog..★
                                   
                                  ★So wait my 13th blog.....★

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