The going concern concept, also known as the continuity assumption, is a fundamental principle in accounting that assumes a business entity will continue to operate for the foreseeable future and will be able to realize assets and discharge obligations in the normal course of business.

In simpler terms, it means accountants assume the business will not liquidate or be forced to cease operations in the near term. This assumption justifies several accounting practices, such as:

• Depreciation: Assets are depreciated over their useful lives, assuming the business will use them for that period.
• Amortization: Similar to depreciation, intangible assets are amortized over their expected benefit period.
• Historical Cost: Assets are typically recorded at their historical cost rather than their liquidation value.
• Deferral of Expenses: Expenses paid in advance can be deferred to future periods if they benefit those periods.

If there is substantial doubt about a company's ability to continue as a going concern, it must be disclosed in the financial statements, along with the reasons for the uncertainty and management's plans to address it. Failure to disclose such concerns can have serious implications for the reliability and credibility of the financial statements.

More information can be found at:

• AccountingTools - Going Concern Principle
• Investopedia - Going Concern