Answer to Question #62552 in Accounting for Asif

Question

The principle of consistency means that the company should use the same method of depreciation for all the fixed assets. is it true or false? please explain

Answer 1

It is false.

The principle of consistency means that once company adopted an accounting principle or method, it should keep following it consistently in all accounting periods. It provides financial statements in different periods to be comparable.

The only reason for changing the accounting method is when it somehow improves the reported financial results. The effect of this change should be documented and attached to the financial statement.

IRS requires accountants use the same method of depreciation for all assets within the same classification. But this is not the principle of consistency.