Why is it necessary for the accountant to assume that the business entity will remain a going concern?
Dear Student, it is necessary for the accountant to assume that business will run for a long period of time (going concern concept) because of this concept a distinction can be made between a Capital Expenditure (give benefit for long period) and Revenue Expenditure (benefit will be consumed or exhausted with in one year). Only on the basis of this concept fixed assets are recorded at their original cost and depreciated in a systematic manner without reference to their market value.
Therefore, it compulsory for the accountant to assume that business is running on the Going Concern Concept.
Therefore, it compulsory for the accountant to assume that business is running on the Going Concern Concept.