What is a consistency in accounting?
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The consistency principle of accounting states that once an entity has adopted a certain practice and method, it should use the same practice and method for subsequent events of the same nature unless there is a sound reason to switch. Show
Consistency Principle: ExplanationSometimes, an accountant has to deal with issues that can be handled by a variety of principles (e.g., depreciation on fixed assets, valuation of stock, etc). This principle stresses that the accountant should select one approach and apply it consistently. The ruling about consistency applies where a change in approach could affect the profit of a business. However, this does not mean that changes can never be made. Any reasonable change to improve the work of accounting is permitted, but an appropriate note to explain the change must be written to make it clear. ExampleOften, there is more than one correct way to complete a task. For example, there are many viable methods of calculating depreciation on fixed assets. A business can choose any of them to compute depreciation for any assets without contravening any accounting principles or concepts. However, in this example, whatever method is chosen for the purpose of depreciation must be consistently used for the same class of assets year after year. The objective of this principle is to ensure that the performance of different years can be measured and judged on the same basis year after year. For example, if a business uses the straight-line method to calculate depreciation on its motor vehicles in 2015 but changes the method to the declining balance approach for the next year, the accounts for these two years will not be comparable. While the consistency principle essentially refers to having an unchanged basis of accounting from one financial year to another, it also has another important aspect. This involves being in line with whatever accounting principles, standards, and concepts are in use within other business units in similar fields (i.e., having accounting policies consistent with the rest of the industry). For example, most oil marketing companies use the same methods of capitalization, income recognition, or treatment of research expenditure. Frequently Asked QuestionsWhat does Consistency Principles of Accounting mean?According to the principle of consistency, once an entity has adopted a practice or method for recording transactions, it should apply the same practice or method for subsequent transactions unless there is a sound business reason to deviate from what is already in use. What is the aim of Consistency Principle?The main objective behind this principle is to ensure that performance can be measured and judged on the same basis year after year. For example, if a business uses the straight-line method for Depreciation on its motor vehicles in 2015 but changes it to the declining balance method for next year, accounts of these two years will not be comparable. What is the difference between consistency and conservatism?Consistency refers to using same Accounting Principle or method for recording transactions while conservatism refers to use of lower value in reporting that could lead to overstatement of assets, revenue, and income. In other words, consistency applies when there are multiple methods for valuing an asset but conservatism implies use the lowest value in the reports. Is consistency required in any situation?Accounting standards do not say that business should adhere to the principle of consistency in every case. Changes can be made to improve work of accounting, but an appropriate note must be given which explains about change made. How is consistency in accounting different from consistency in communication?Consistency refers to using same terms when reporting the figures. For example, if profit before tax is used for year 1 and profit after tax is used for year 2, it would not be considered as consistent with communication standards. On the other hand, communication principles do not refer to use of the same accounting policies. 
About the Author True Tamplin, BSc, CEPF®True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists. True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics. To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.
What is consistency in accounting with examples?A quality of accounting information that facilitates comparing a company's reporting of one accounting period to another. For example, the reader of a company's financial statements can assume that the company is using the same inventory cost flow assumption this period as it used last period or last year.
What is a consistency concept?Meaning of consistency concept in English
According to the consistency concept, once a business has decided on a particular method for treating an accounting item, it will treat all similar items in the same way in the future.
What is consistency in GAAP?The GAAP consistency principle states that when a business has fixed a method for the accounting treatment of an item, it will enter all similar items in the exact same way in the future.
What is consistency assumption in accounting?Consistency assumption refers to the underlying fact that the same accounting guidelines are adhered to while preparing financial statements from one period to the next. There are no frequent changes to be expected. It is assumed that accounting policies are consistent from one period to another.
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