CA Foundation · Accounting · Theoretical Framework

Verma Traders changes its method of charging depreciation from straight line to written down value every year to suit the profit it wants to show. Which accounting convention or concept is most directly violated?

Consistency is violated. This convention requires the same accounting methods to be applied period after period so that results can be compared. Switching depreciation methods every year to manage profit defeats comparability, whereas dual aspect, materiality and money measurement are not involved.

AConsistencyCorrect
BMateriality
CMoney measurement
DDual aspect

Explanation

Consistency requires that the same accounting policies and methods be followed from one period to another so that results are comparable. Changing the depreciation method each year to manage profit breaks this requirement. Dual aspect concerns the two-sided effect of every transaction and is not affected by the choice of depreciation method.

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