Commercial Applications
A company decides to change its method of depreciation from the straight-line method to the reducing balance method without disclosing this change in the financial statements. Which principle has been violated?
- Matching Principle
- Consistency Principle
- Dual Aspect Principle
- Going Concern Concept
GAAP
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Answer
Consistency Principle
Reason — The Principle of Consistency states that accounting procedures and methods should remain consistent from one year to another. When a change becomes necessary, the change and its effect must be clearly disclosed. Changing the depreciation method without disclosing the change violates this principle.
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