The Going Concern Assumption

question 51

Multiple Choice

The going concern assumption

• A) states that a company will not operate long enough to utilize assets and fulfill obligations.
• B) assumes the company will continue to operate in the foreseeable future.
• C) is inconsistent with the historical cost measurement method.
• D) states that net worth is the most appropriate value at which to record assets.

---

Definitions:

Sales On Account

Revenue generated from customers who purchase goods or services on credit, to be paid at a later date.

Cost Of Goods Sold

Expenses specifically arising from the production of the merchandise a business sells, such as labor and materials.

Acid-Test Ratio

A liquidity ratio that measures a company's ability to pay off its current liabilities with its quick assets without needing to sell inventory.

Balance Sheet

A financial statement that shows a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a snapshot of the firm's financial condition.