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
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.
Related Questions
Which of these is not a purpose of financial recordings?
- Ascertaining financial position
- Making accounting information available to stakeholders
- Journal
- None of these
The accounting cycle consists of
- Journal
- Ledger
- Trial balance
- All of these
It is the second stage and provides conclusions.
- Accounting
- Book keeping
- Book maintaining
- Book recording
A company values its machinery at its original purchase cost minus accumulated depreciation. This valuation method is based on which of the following assumptions?
- Money Measurement Concept
- Going Concern Concept
- Realisation Principle
- Dual Aspect Principle