Consistency

In: Business and Management

Submitted By irenethor
Words 340
Pages 2
Consistency definition:
The consistency principle states that, once accountants adopt an accounting principles, methods, practices, and procedures, continue to follow it consistently in future accounting periods. In other words, the readers of a company's financial statements can presume that the same rules and measurements were followed in all of the years being reported. If a change is made to a more preferred accounting method, the effects of the change must be clearly disclosed.
. http://www.accountingtools.com/consistency-principle http://www.accountingcoach.com/blog/what-is-consistency-principle Consistency examples: 1. Computer Company X has been using declining balance depreciation method for its computer equipment. The consistency principle states that, once accountants adopt declining balance depreciation method for its computer equipment, it should continue to use in future accounting period. If the company wants change the depreciation method from declining balance method to straight line method, it must show in its financial report, also show the reasons and the effects of the change. http://accountingexplained.com/financial/principles/consistency 2. Computer Company Z has been using First-in-First-out method (FIFO) for valued its own inventory. According to the consistency principle, once accountants adopt First-in-First-out method (FIFO) for valued its own inventory, it must continue to use in future accounting period. If the company wants to change the inventory valuation method from First-in-First-out method (FIFO) to Weighted Averaged method (WAC), it must provide a justifiable reason and the effect of the change.
Consistency usefulness:

3.
Company B is a retailer dealing in shoes. It used first-in-first-out method of inventory valuation in respect of shoes at Branch X and weighted average inventory valuation method in respect…...

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