Question

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?

Options

• Matching Principle

• Consistency Principle

• Dual Aspect Principle

• Going Concern Concept

Answer 1

Consistency Principle

Explanation:

The Consistency Principle states that accounting procedures and methods (such as depreciation) must be consistent from one fiscal year to the next in order to allow for meaningful year-over-year comparisons. If a corporation changes its depreciation method, it is legally required to report the type, causes, and financial impact of the change in its financial statements; therefore, an undisclosed move is a clear violation.