Question

It is the policy of Marigori Sdn Bhd to depreciate all its tangible non-current assets based...

It is the policy of Marigori Sdn Bhd to depreciate all its tangible non-current assets based on straight line method. However, for the year 2019, the company decided to change the depreciation of motor vehicle and office equipment to reducing balance method. This violates the _____ concept.

Homework Answers

Answer #1

Here, Consistency principle / concept is being violated. As per consistency concept, the accounting methods once adopted, must be applied consistently year after year. The change in methods can be done only for valid reasons with proper disclosure in the notes to the accounts. Since, Morigori Sdn Bhd was using straight line method earlier but in 2019 it changed the method for motor vehicle and office equipment to reducing balance method, so there is a violation of consistency concept.

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