P2 C6 Conventions, Assumption. Concepts and Principles ofAccounting — Account STD 11 Commerce — Question

The principle of consistency suggests that while writing accounts orpreparing financial statements the same policies, procedures and methods should be followedevery year. Comparison of accounts and trend analysis can be possible only if the principleof consistency is followed. Accounts remain comparable only if consistency is maintained.If consistency is not maintained in accounting, the accounts may not remain comparable andcan also mislead at times. If the method of depreciation or method used for stock valuationis changed every year, the accounts do not remain comparable and the profit or loss positionof different years may also indicates different positions. Consistency also requires that suchmethods should not be changed frequently. It should be remembered that an accountingpractice that is followed based on some accounting principle or concept.The principle of consistency does not mean that the business cannot switch over tobetter and up to date method. If the business deviates from the previous practices andchanges method, the fact should be disclosed with reason. Consistantly does not violate theprinciple of consistency. For example, valuation of stock at cost or market price whicheveris less this will not violate the principle of consistency.
In the consistency principle, personal bias can be avoided. The accountant has to followconsistently the same set of principles, practice, procedures or methods every year. Thelogic behind the principle of consistency is that the users of financial statements lose confidencein the accounts.