The Principle of Consistency Means That

question 51

Multiple Choice

The principle of consistency means that:

• A)the accounting methods used by an entity never change.
• B)the same accounting methods are used by all firms in an industry.
• C)the effect of any change in an accounting method will be disclosed in the financial statements or notes thereto.
• D)there are no alternative methods of accounting for the same transaction.

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Definitions:

Activity-Based Method

An accounting method that assigns costs to products or services based on the activities and resources that go into producing them, to more accurately reflect the costs associated with each product or service.

Usage Hours

A measure of the time that an asset is actively used in production or operations.

Activity Method

A depreciation method where the asset’s expense is based on its usage or activity level, rather than the passage of time.

Unit Cost

The cost incurred by a company to produce, store, and sell one unit of a particular product or service.