Texas A&M University (TAMU) ACCT229 Introductory Accounting Practice Exam 1

The correct term for the assumption that a company will continue its operations for the foreseeable future without the threat of liquidation is the "Going-Concern" principle. This assumption is fundamental in accounting because it affects how financial statements are prepared. Under the going-concern assumption, it is presumed that the business will remain in operation long enough to carry out its current plans and commitments. This allows the company to report its assets at their historical cost rather than at liquidation value, which accurately reflects its expected continued use in operations.

This principle is vital for investors, creditors, and other stakeholders since it impacts their assessments of the financial health and future viability of a company. The going-concern assumption can be challenged if there are indications that the company may not be able to continue operating, which could lead to a different approach in financial reporting.

The other options, while related to business concepts, do not accurately describe this specific accounting assumption. The continuity principle, for instance, is closely related but is not the formal term widely recognized in accounting. Future viability and sustainability principle pertain to concepts of long-term success and environmental responsibility but do not specifically refer to the operational continuity of a business without liquidation.