Question

Assume that one of your colleagues states that a company’s books should be ongoing and therefore not closed until that business is terminated. Explain the concept of the closing process by drawing analogies between (1) a scoreboard for an athletic event and the revenue and expense accounts of a business or (2) a sports team’s record book and retained earnings. (Hint: Think about what would happen if the scoreboard were not cleared before the start of a new game.)

Answer 1

Going concern concept of an entity states that the business will continue in future and book of account are prepared taking the going concern assumption.

Now taking about the scoreboard of an athletic event, scorboard are cleared at the beginning of each event that mean completion of each event mark the end of the event. In case scoreboard are not cleared then the day performace could not meansured of an athlete. However the world record created are kept as stored as the performance benchmarks.

Therefore in this manner we can say that business follows going concern concept while preparing book of account but account of athletic are cleared at each event.