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why D AND NOT C?
The purpose of a Statement of Financial Position is to show:
A a clear and definite estimate of what a business is really worth
B the amount the business could be sold for in liquidation
C the amount the business could be sold for as a going concern
D the assets of the business and the claims against those assetsThe Statement of Financial Position does not show what the business is really worth.
For example, we show non-current assets usually at their original cost less depreciation (depreciation is covered in the later chapter), but that does not mean that the asset is actually worth that much.
Also, many businesses could be sold for more that the value of the assets on their statement of financial position because they are already a thriving business and any purchaser of the business would almost be guaranteed to start making profits immediately (whereas if they simply bought assets and started the business from nothing it would take time to start making profits). This extra value (or goodwill) is not show on the statement of financial position.
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