The Consistency Concept

question 201

Multiple Choice

The consistency concept:

• A)Prescribes that a company use the same accounting method period after period except when a change of method will improve financial reporting.
• B)Requires a company to use a single method of inventory valuation for all categories of inventory.
• C)Requires that all companies in the same industry use the same method of inventory valuation.
• D)Is also called the full disclosure concept.
• E)Is also called the matching concept.

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Definitions:

Interest

The charge for borrowing money, typically expressed as a percentage of the amount borrowed, paid by the borrower to the lender.

Cash Flow Ratio

A financial metric that compares a company's operating cash flow to its current liabilities, indicating its ability to pay off its obligations with the cash it generates.

Operating Activities

Activities directly related to the business's primary operations, including cash flows from sales, expenses, and cost of goods sold.

Total Assets

The total of a company's assets, encompassing both short-term and long-term assets.