Question

According to the 'Going Concern' concept, assets are recorded at:

• A. Market value
• B. Realizable value
• C. Historical cost
• D. Liquidation value

Hint:

Going Concern Concept assumes that the business will continue for a long period. Therefore assets are recorded at: \[ \boxed{\text{Historical Cost}} \] and not at market value or liquidation value.

Answer 1

The Correct Option is C

Concept: The Going Concern Concept assumes that the business will continue to operate for an indefinite future and there is no intention or necessity to liquidate it. Because of this assumption, assets are recorded at their original acquisition cost rather than their market value or liquidation value. This principle forms one of the fundamental assumptions of accounting.

Step 1: Understand the meaning of Going Concern.
The concept assumes:
• Business will continue operations.
• Assets will be used in future.
• Liabilities will be paid in normal course.
• There is no immediate closure.

Step 2: Understand asset valuation.
Suppose machinery was purchased for: \[ ₹5,00,000 \] After one year, market value may become: \[ ₹6,00,000 \] or \[ ₹4,50,000 \] Still, accounting records continue on the basis of original cost (subject to depreciation).

Step 3: Why not market value?
Market values fluctuate frequently. Recording assets at market value would reduce consistency and comparability. Therefore accounting prefers historical cost.

Step 4: Why not liquidation value?
Liquidation value becomes relevant only when the business is expected to close. The Going Concern assumption specifically states that closure is not expected. Hence liquidation value is ignored.

Step 5: Evaluate the options.
Option (A): Market Value. Incorrect. Option (B): Realizable Value. Incorrect. Option (C): Historical Cost. Correct. Option (D): Liquidation Value. Incorrect.

Step 6: Select the correct answer.
According to the Going Concern Concept: \[ \boxed{\text{Assets are recorded at Historical Cost}} \] Therefore, \[ \boxed{(C)} \]