What are the effects of these transactions (U.R. Smart)
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1. In the +, -, 0 set of statements, I said assume the firm is a "going concern.' What is meant by the term "going concern?"
2. Assuming a current ratio of more than 1:1, what causes the current ratio to increase?
3. We all know what "window dressing is," from the +, -, 0 problem explain how a firm can "window dress' its financial statements.
Attached sheet is provided, however I already answered those questions now I just need help with the above three to help me prepare for a paper I have to write.
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1 Going concern assumption is a basic assumption. It implies that the firm will continue to operate its activities. Indefinitely or for a foreseeable future. Unless it is closed or terminated by its owners. This concept enables the accountants that a business will continue long enough to recover costs of its assets. The historical cost principle would be useless if we assume liquidation and accept liquidation approach. .The following policies and treatments are justified only on the assumption of "Going concern"
1 Allocation of cost of the amortized assets to future periods to match with future revenues.
2 Classification of assets as current and fixed .assets
3 Classification of liabilities as current and fixed liabilities.
The Going concern assumption applies in general to most of the businesses and even the companies suffering or facing financial crisis may develop a plan for its restructuring and reorganization under the Going concern assumption.
Going concerns also implies that the firm expects to continue its business for a long period to accomplish its objectives and commitments.
2 Current ...
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