Going Concern Assumption Nobody starts business with the target of winding up business in short period of time. So, this assumption is created and adopted for the processing of business transactions. And that use in accounting with the assumption that business started will continue for a longer period. On the basis of this assumption, we record and treat capital expenditure, that are expenditure on fixed assets or capital. That items will be used in business for a longer period. To understand this better we can consider the example of depreciation. Depreciation is charged on fixed assets till the life of that asset. Without Going concern assumption, we will not be able to consider depreciation for its life.
Going Concern Assumption
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