Keyword Analysis & Research: meaning of consistency in accounting

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Frequently Asked Questions

What are the benefits of consistency in accounting?

As a business owner, following the Consistency Principle offers several specific advantages: Ease of auditing by a third party. Consistency helps accountants record the accounting transactions and work with the accounts. It helps the auditors compare the financial statements and provides the basis for the reliability of financial statements.

What is the consistency concept in accounting?

The consistency principle states that all accounting treatments should be followed consistently throughout the current and future period unless required by law to change or the change gives a better presentation in accounts. This principle prevents manipulation in accounts and makes financial statements comparable across historical periods.

What are some examples of accounting methods that should be used consistently?

The concept of consistency is applied particularly when alternative methods of accounting are equally acceptable. For example, a company may adopt several methods of depreciation such as the written-down-value method, straight-line method, etc. Likewise, there are many methods for the valuation of inventories.

Are there any drawbacks to consistency in accounting?

The consistency principle is most frequently ignored when the managers of a business are trying to report more revenue or profits than would be allowed through a strict interpretation of the accounting standards.

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