Accountıng I Deneme Sınavı Sorusu #1313831
Which of the following is true for the "consistency principle" of accounting?
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It is that businesses should report the least favorable figures in the financial statements when two or more possible options are presented |
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It requires strictly proper accounting only for items that are significant to the business’s financial situation according to the materiality concept requirements. |
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It is that enough information for outsiders to make knowledgeable decisions about the company is not compulsory |
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It rests on a conceptual framework that identifies the objectives, characteristics, elements, and implementation of financial statements |
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It holds that companies should use the same accounting methods and procedures in each accounting period |
The consistency principle holds that companies should use the same accounting methods and procedures in each accounting period, so that the information provided will help investors and creditors to compare a company’s financial statements from one period to the next. For example, assume that you are analyzing a company’s net income over a two-year period in which there was a decrease in net income from the first year to the second. Analysis of the income statement shows that Sales Revenue was almost the same for both years, but Cost of Goods Sold increased significantly, which resulted in decreases in gross profit and operating income.
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