This question relates to the cost principle. If the accounting policy of an enterprise is to depreciate its vehicles at ‘a rate that is deemed to be sufficient to reduce the book value of the vehicles over their estimated useful life to their estimated residual value’, and the applicable rate is:

Vehicles – 2% per annum on the straight-line method, and in one year, for an unknown reason.

The bookkeeper writes off depreciation on vehicles at 20% per annum on the reducingbalance method:

1. What accounting principle is violated?

2. Why is this a violation?

3. When is this type of practice acceptable?