CSEET · Fundamentals of Accounting · Accounting Process
A company follows the straight line method of depreciation every year and does not change it without a valid reason. Which accounting convention is being followed?
The convention is consistency. It requires a business to apply the same accounting methods, such as straight line depreciation, year after year unless there is a valid reason to change, so that financial statements of different periods stay comparable.
- AConsistencyCorrect
- BMateriality
- CFull disclosure
- DConservatism
Explanation
Consistency requires that the same accounting policies and methods be followed from one period to the next so that results are comparable. Materiality concerns the significance of items, full disclosure concerns revealing relevant information, and conservatism concerns anticipating losses.
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