Theoretical FrameworkQuestion 4617 of 110
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Distinguish between Going Concern concept and Cost concept. [May 2019, 4 Marks; June 2024,1 Mark]

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Detailed Solution & Explanation

Going Concern Concept:  It implies that the concern will be continuing the business for foreseeable future.  It is assumed that the enterprise has neither the intention nor the necessity of liquidation or of curtailing materially the scale of the operations.  If such an intention or need exist, the financial statements may have to be prepared on a different basis and, if so, the basis is disclosed.  Because of this, expenditure is divided into Capital & Revenue Expenditure & the Fixed Assets are valued at cost less Depreciation.  Because of this account of the whole life is divided into smaller accounting periods. (periodicity concept)  Going concern is a fundamental accounting assumption. Cost Concept:  The assets & properties are recorded at its cost to the concern & not at its market value.  Except stock which may be valued at cost or market price which- ever is lower.  As per this concept Fixed assets are recorded at their acquisition cost & then depreciated over its useful life.  Ex.: Building purchased for 10 lakh. Its market value is 11 lakh. In books of account building will be recorded at cost i.e. 10 lakh.

About This Chapter: Theoretical Framework

Paper

Paper 1: Accounting

Weightage

5-10%

Key Topics

Policies, Standards (Ind AS), Vocabulary

This chapter covers Policies, Standards (Ind AS), Vocabulary and is part of Paper 1: Accounting in the CA Foundation exam.

View Official ICAI Syllabus

Exam Strategy Tip

This topic carries 5-10% weightage. Focus on understanding core concepts rather than memorizing.

Key Concepts to Understand

Going Concern Concept

The assumption that an enterprise will continue in operation for the foreseeable future and has no intention to liquidate or curtail materially the scale of its operations.

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