Question

Assertion (A): The Going Concern Principle assumes that a company will continue its operations for the foreseeable future.

Reason (R): This principle allows fixed assets to record at market value. assets and liabilities to be reported at their historical cost rather than their liquidation value.

Options

• A is true but R is false.

• A is false but R is true.

• Both A and R are true and R explains A.

• Both A and R are true and R explains A.

Answer 1

A is true but R is false.

Explanation:

• Assertion (A): The Going Concern Principle is a fundamental accounting assumption that a company will continue to operate indefinitely into the foreseeable future, with no intention or need to liquidate its operations.
• Reason (R): The reason contains contradictory information. It claims that the approach allows fixed assets to be recorded at market value, which is false. Because of the going concern assumption, assets and liabilities are recorded at their historical cost (less accumulated depreciation) rather than their current market or liquidation prices.