If a company has declared bankruptcy, its financial statements likely violate:
A)The matching principle.
B)The realization principle.
C)The stable monetary unit assumption.
D)The going concern assumption.

Question

Quizplus · Accepted Answer

If a company has declared bankruptcy, it means that it cannot continue as a going concern - meaning it will not be able to operate in the long-term. Therefore, the financial statements will likely violate the going concern assumption, which assumes that the company will continue to operate in the foreseeable future. The other principles/assumptions (matching principle, realization principle, stable monetary unit assumption) may still apply even if a company has declared bankruptcy.

If a Company Has Declared Bankruptcy, Its Financial Statements Likely