Larry owns a successful business called Super Car-Hire. He plans to sell it to Bob. Bob assumes that he can keep up the high revenues if he can plan and execute the mission of the business well. Which of the following basic accounting concepts is reflected in Bob's assumption?

A. The business entity ideaB. The going concern expectationC. The accounting equationD. The revenue and expense premise

Question

Business

Duchess

24 November, 18:26

Larry owns a successful business called Super Car-Hire. He plans to sell it to Bob. Bob assumes that he can keep up the high revenues if he can plan and execute the mission of the business well. Which of the following basic accounting concepts is reflected in Bob's assumption?

A. The business entity ideaB. The going concern expectationC. The accounting equationD. The revenue and expense premise

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Answers (1)

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Ariella Potter · Answer 1

B is the correct option.

Explanation:

This principle follows the assumption that a company will remain in business in the future. It means that the business will not have to halt operations or to liquidate the assets in the future. According to this principle, the accountant postpones the recognition of some expenses till a later period, and in that period the company will be in business will be effectively using the assets. It is a very important concept, without this, the company will not be able to prepay the expenses.