If a business is no longer expected to continue operating, which valuation approach becomes more relevant than normal going-concern valuation?
Correct answer: B. Liquidation or realisable value
- A. Original invoice value only
- B. Liquidation or realisable value
- C. Expected future sales value
- D. Nominal value of owner's capital
Explanation
When continuation is doubtful, assets may need to be measured at amounts obtainable through sale or liquidation. Going-concern accounting instead assumes that assets will be used in ongoing operations.
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About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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