Which accounting concept requires that a business expects to continue operating in the foreseeable future?
Answer and explanation
Correct answer: B. Going concern
- Step 1: Under the going concern concept, assets are valued on the basis of continued trading, not forced sale. Answer: Going concern. Why not the others: Prudence: Prudence deals with not overstating profits or assets. Materiality: Materiality deals with the importance of an item. Accruals: Accruals matches income and expenses to the period they relate to.
Practise more Accounting concepts and double entry.
Free questions with an explanation for every one, and full timed KASNEB CPA Foundation Level (Kenya) mock tests.
More Accounting concepts and double entry questions
- At the start of the year a trader's assets were KSh 900,000 and liabilities KSh 400,000. What was the owner's capital?
- A business buys office furniture for cash. What is the effect on the accounting equation?
- Which accounting concept requires revenue and expenses to be recorded in the period they occur, not when cash is paid or received?
- The business entity concept states that
- Which of the following is a capital expenditure?
- A debit balance on a bank account in the cash book means the business