The assumption that a business will continue indefinitely is reflected in the accounting concept of:

• A. Materiality
• B. Objective evidence
• C. Going concern
• D. Cost

Answer: (C)

The going concern assumption means the business is expected to operate for the foreseeable future. Because of this, financial statements value assets as if the company will continue, so long-lived assets are recorded at cost and depreciated over their useful lives rather than at liquidation values. Liabilities are also seen as being settled in the normal course of business. If there were real doubt about continued operation, different accounting would apply, such as impairment considerations or disclosures about going concern uncertainties.

The other concepts don’t hinge on whether the business will keep operating. Materiality deals with the significance of information for decision-making, objective evidence relates to verifiability, and cost concerns the measurement basis, not the assumption of ongoing operations.