25 Insolvency and going concern risk
‘Prudence is a rich ugly old maid, and her beau is Insolvency.’
William Blake poet, painter, printmaker
In a nutshell
Insolvency is a legal term used to describe the situation where a company is unable to repay the debts that it owes. This can lead to insolvency proceedings, in which legal action is taken against the entity, and assets are liquidated to pay off outstanding debts.
Going concern is an accounting concept used to describe a state of operational continuity for a business. The going concern presumption, applied when preparing financial statements, is that a company can continue to operate into the foreseeable future with no intention or need to stop trading.
Going concern and insolvency are ...
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