Question

Consider the following statements.

Statement 1 - "Going Concern concept assumes that the enterprise continues for a long period of time."

Statement 2 - "Going Concern concept assumes that the enterprise continues for a shorter period of time."

Options

• Only statement 1 is correct

• Only statement 2 is correct 

• Both the statement are correct

• None of these

Answer 1

Only statement 1 is correct

Explanation:

Going concern premise, money measurement postulate, realization postulate, and other basic assumptions (pre-requisites) are used to prepare financial statements. The going concern postulate presupposes that the business is treated as a going concern and will continue to operate for a long time. As a result, the assets are valued at their historical cost.