Final answer:
A firm that is bankrupt does not follow the Going Concern Assumption as it is based on the business continuing operations into the foreseeable future, which is not the case in bankruptcy.
Step-by-step explanation:
When a firm declares bankruptcy, it is no longer appropriate to apply the Going Concern Assumption. The Going Concern Assumption outlines that a firm is expected to continue its operations into the foreseeable future and not liquidate its assets. This assumption allows for deferring the recognition of certain expenses to future accounting periods when the firm is expected to be operating.
In the case of bankruptcy, the assumption is that the firm will not continue its operations, and hence the financial results should reflect the liquidation values of assets rather than their going concern values. It's important for the financial statements of a bankrupt firm to reflect its actual financial status and therefore they cannot assume the business will operate indefinitely as the Going Concern Assumption would necessitate.
The other basic assumptions like the Monetary Unit Assumption, where financial events are recorded in a monetary unit, the Time Period Assumption, which enables reporting financial results in discrete time periods, and the Economic Entity Assumption, which keeps business transactions separate from the personal transactions of its owners, are still applicable even in the event of bankruptcy.