‘The historical cost convention looks backwards but the going concern convention looks forwards.’

Required:

(a) Explain clearly what is meant by:

(i) the historical cost convention;

(if) the going concern convention.

(b) Does traditional financial accounting, using the historical cost convention, make the going concern convention unnecessary? Explain your answer fully.

(c) Which do you think a shareholder is likely to find more useful — a report on the past or an estimate of the future? Why?

(Association of Chartered Certified Accountants)