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Question
Explain the principle of consistency.
Solution
- It is possible to adopt a variety of principles and procedures for business transactions. An accountant is often faced with a choice of methods of dealing with certain items like depreciation of fixed assets, valuation of closing stock etc. Having made his choice, he should follow it consistently so that the figures of one accounting period may be comparable with those for another.
- Hence whatever accounting method a business unit decides to adopt, a consistent approach has to be followed for different accounting periods. However, consistency does not prohibit a change in accounting policies. Necessary required changes are fully disclosed by presenting them in the financial statements indicating their probable effects on the financial results of the business.
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