Dictionary / Going Concern
What does Going Concern mean in accounting?
Quick definition
GeneralAny enterprise that is expected to continue operating indefinitely in the future; hence, its collective assets, liabilities, revenues, operating cost, personnel, policies, and prospects; a basic axiom essential to the accounting and reporting of business transactions. This term guides how bookkeepers record, classify, and explain related transactions in routine financial reporting.
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Examples
A used press you still plan to run
You run a print shop. On April 3 you buy a used press from a press dealer for $14,750, and you plan to keep printing next year and the year after. That going-concern assumption is why you code that dealer's bill to Equipment at $14,750 and start monthly depreciation over the years you will use the press, instead of writing it down to the $3,100 a broker quoted for a same-week sale. In QuickBooks Online or Xero, the balance sheet shows the press at cost, less accumulated depreciation, not the fire-sale quote. If you expense the press or drop it to $3,100 while you still intend to operate, you are not following going concern.
Year-end books when closing is on the table
You run a candle shop. By December 6 you have missed two rent payments, the operating line is maxed, and you tell your CPA you may close the shop in February. The CPA adds a going-concern footnote to the November 30 statements so readers do not assume indefinite continuation; you do not post a going-concern expense. Send the CPA the cash forecast, unpaid rent, and what the $6,800 pouring tables might bring if you sold them next month, not the leftover book after a five-year useful life. Ask your CPA what the statements should show; this is not legal advice about whether you must close.
Why it matters
Going concern is the assumption that your business will keep operating, which is why you record lasting purchases as fixed assets at cost and spread prepaid expenses instead of treating every item as if you were selling the shop tomorrow. You will not post a going-concern journal entry most months; the axiom sits under every close and only becomes a live question at year-end review, a loan package, or when cash or losses make continuation uncertain. Mix it up with a credit-score idea or a general sense that the business is healthy, and you miss the bookkeeping point. Write assets down to fire-sale value while you still intend to operate, and the balance sheet no longer matches how you use those items; keep taking depreciation and deferring prepaid costs after you have already decided to wind down, and the statements hide that the assumption no longer holds.
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What is Going Concern in bookkeeping?
Any enterprise that is expected to continue operating indefinitely in the future; hence, its collective assets, liabilities, revenues, operating cost, personnel, policies, and prospects; a basic axiom essential to the accounting and reporting of business transactions.
When should I use Going Concern?
Use Going Concern when the transaction facts match its definition and you need the ledger and financial statements to reflect the correct account and period.
What is a common mistake with Going Concern?
Going Concern is used for going concern entries, while GAAP covers a related but distinct bookkeeping purpose. Review both terms before posting unusual transactions. A common mistake is applying it by label only instead of checking the underlying transaction details.