Under the going concern assumption, which treatment is generally appropriate for a machine used in business operations?
Correct answer: B. Depreciate it over its useful life
- A. Charge its full cost as an immediate loss
- B. Depreciate it over its useful life
- C. Value it only at its scrap price
- D. Exclude it from the statement of financial position
Explanation
Going concern assumes that the business will continue operating and using its assets. The machine is therefore allocated as an expense through depreciation over its useful life rather than valued as if operations were ending.
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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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