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CA Foundation · Accounting · Depreciation and Amortisation

Which of the following is a permitted reason under AS 6 for changing the method of depreciation?

AS 6 permits a change in depreciation method only if required by statute, needed for compliance with an accounting standard, or if it gives a more appropriate presentation of the financial statements. Desire for higher profit, lower tax or mere preference is not an acceptable reason.

  1. AThe change is required by statute or for compliance with an accounting standard, or gives a more appropriate presentationCorrect
  2. BThe business wishes to show higher profit in the current year
  3. CThe promoters wish to reduce tax this year
  4. DThe auditor prefers a different method without any other reason

Explanation

AS 6 allows a change in method only when required by statute, for compliance with an accounting standard, or when the change gives a more appropriate preparation or presentation of the financial statements. Wanting higher profit or lower tax is not valid justification.

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