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The going concern concept states that a business organization will continue to operate indefinitely. To that end, the accounting procedure is broken down into a few steps or stages in order to ascertain the outcomes of business transactions.
For example, transactions are initially recorded in the journal. These are then posted in the ledger from the journal. These are then transferred from the ledger to the trial balance. Finally, the financial statements are prepared using the trial balance.
The functions are repeated at the end of each accounting year in the same sequence for keeping accounts.
As a result, at the end of the current accounting period, the next accounting period begins, and the recording of accounts begins again. As a result, it is observed that accounting-related topics are repeated year after year. This is the accounting continuity.
Then these transactions are classified and posted in the ledger. After that, financial statements are prepared to determine financial results and position after a trial balance using ledger balances has been prepared.
When creating accounts, similar procedures are followed, with the accounting process beginning with normalization and ending with the creation of financial statements, including a post-closing trial balance.
- Accounts Receivable $40,000
- Bank Deposit $25,000
- Building $45,000
- Accounts payable $30,000
- Notes payable $10,000 and
- Capital $70,000
The first stage of accounting normalization is used in this situation.
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