Accounting Conventions : 3. Convention of Consistency:
The convention of Consistency signifies that the accounting practices and methods should remain consistent (i.e., unchanged) from one accounting year to another. For instance, when once a particular method of depreciation is adopted for a particular fixed asset, the same method should be followed for that asset year after year. Similarly, when once stock,-in-trade is valued at cost price or market price whichever is lower, the same practice should be continued for all the years.
The idea behind the convention of Consistency is that, unless the same accounting practices and methods are followed from year to year, comparison of the accounting figures of one year with those of another year would be difficult, and consequently, drawing of conclusions about the progress of the concern over a number of years becomes difficult.
It should be noted that the convention of consistency does not mean that the accounting treatment of various categories of assets should be consistent with one another. For instance, this convention does not mean that the same method of valuation should be followed for both current assets and fixed assets. What it really means is that, whatever accounting practice is followed for a particular asset, the same practice should be followed for that asset from year to year.
Another point to be noted is that this convention does not mean that the accounting practices and methods, once adopted, should not be changed. The accounting practices and methods can be changed, when needed. But any change made in the accounting practices and methods should be clearly disclosed and adequately explained.
The convention of Consistency signifies that the accounting practices and methods should remain consistent (i.e., unchanged) from one accounting year to another. For instance, when once a particular method of depreciation is adopted for a particular fixed asset, the same method should be followed for that asset year after year. Similarly, when once stock,-in-trade is valued at cost price or market price whichever is lower, the same practice should be continued for all the years.
The idea behind the convention of Consistency is that, unless the same accounting practices and methods are followed from year to year, comparison of the accounting figures of one year with those of another year would be difficult, and consequently, drawing of conclusions about the progress of the concern over a number of years becomes difficult.
It should be noted that the convention of consistency does not mean that the accounting treatment of various categories of assets should be consistent with one another. For instance, this convention does not mean that the same method of valuation should be followed for both current assets and fixed assets. What it really means is that, whatever accounting practice is followed for a particular asset, the same practice should be followed for that asset from year to year.
Another point to be noted is that this convention does not mean that the accounting practices and methods, once adopted, should not be changed. The accounting practices and methods can be changed, when needed. But any change made in the accounting practices and methods should be clearly disclosed and adequately explained.
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