Accounting Fundamentals Certification (AFC) Practice Test 2025 – The Comprehensive All-in-One Guide to Exam Success!

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What accounting concept is described by the expectation that a business will remain in operation indefinitely?

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Going Concern

The concept described by the expectation that a business will remain in operation indefinitely is known as the Going Concern principle. This fundamental accounting concept assumes that a company will continue its operations for the foreseeable future, allowing it to defer the realization of certain expenses and revenues until later periods. This is particularly important for financial statements, as it justifies the classification of assets and liabilities in a way that reflects ongoing business operations.

Moreover, when preparing financial statements, if a company is not deemed a going concern, different accounting principles may apply, making it critical for accountants and financial professionals to assess the viability of a business. The Going Concern assumption underpins the preparation of the balance sheet and income statement, ensuring that they provide an accurate portrayal of a company's financial health over time.

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