A company follows a practice of expensing the premium on its fire insurance policy when the policy is paid. In 1999 , the company charged to expense the \(\$ 6,000\) premium paid on a threeyear policy covering the period July 1, 1999, to June 30, 2002. In 1996, a premium of \(\$ 5,400\) was charged to expense on the same policy for the period July 1, 1996, to June 30, 1999.

a. State the principle of accounting that was violated by this practice.

b. Compute the effects of this violation on the financial statements for the calendar year 1999 .

c. State the basis on which the company's practice might be justified.