Glossary
Going concern
The assumption that a business will keep operating for the foreseeable future.
What it means
The accounting assumption that an entity will continue in operation for the foreseeable future and is not about to close down.
Example
Assets are valued on the basis the business will keep using them, not sell up.
Why it matters
It underpins how assets and liabilities are measured in the financial statements.
In practice
Going concern is an assumption that shapes how items are valued in the statement of financial position. It is not a figure you post. Because the business is expected to continue, non-current assets are shown at cost less accumulated depreciation. This spreads their cost over their useful lives, instead of showing what they would fetch in a hurried sale.
Suppose delivery vehicles cost RM40,000 with RM16,000 depreciation to date. They appear at a carrying amount of RM24,000, not at a forced-sale value that might be only RM10,000. If the going concern assumption no longer holds, assets would be valued at their break-up or realisable amounts.
Do not confuse going concern with the accruals concept. Accruals governs the timing of income and expenses within a period. Going concern is about the assumed future life of the whole business. It justifies carrying assets and liabilities forward rather than winding them up now.
If the accounting concepts all sound alike, one of our teachers can show you what each one changes in a set of accounts. Book a trial class.
Related terms
Syllabus reference: Cambridge 0452 and 0985, syllabus for 2027 to 2029, sub-topic 7.1 Accounting concepts (page 19).
Definitions here are general accounting explanations for study. For your board's exact wording, see its official syllabus via Sources.
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