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CS Executive · Corporate Accounting and Financial Management · Introduction to Accounting

A company changes its method of charging depreciation on plant from straight line to written down value every year without any legal or business reason, making comparison of its yearly results difficult. Which accounting concept or convention is violated?

The consistency convention is violated. Accounting methods should be applied uniformly from year to year unless a change is required by law or standards or gives a better presentation. Arbitrary switching of depreciation methods makes results of different years non-comparable.

  1. AMoney measurement
  2. BConsistencyCorrect
  3. CBusiness entity
  4. DDual aspect

Explanation

Consistency requires that accounting policies and methods be followed from one period to the next unless a change is required by law, a standard or gives a more appropriate presentation. Frequent unjustified changes impair comparability of results across years. Dual aspect and business entity are not concerned with comparability of methods.

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