The comparison of the financial statement of one accounting period with that of another accounting period is possible only when _______ concept is followed.a)Costb)Consistencyc)Going concernd)MaterialityCorrect answer is option 'B'. Can you explain this answer?

Question

Answer

Consistency Concept in Comparing Financial Statements

The consistency concept is a fundamental accounting principle that requires businesses to use the same accounting methods and procedures from period to period. This concept ensures that financial statements are comparable across different accounting periods, allowing users to make meaningful comparisons and draw accurate conclusions about a company's financial performance.

Explanation:

When the consistency concept is followed, financial statements can be compared meaningfully. The consistency concept requires that a company uses the same accounting policies and procedures in each accounting period. This means that the same methods of recording transactions, valuing assets and liabilities, and presenting financial information must be used consistently over time.

If a company changes its accounting policies or procedures from one period to the next, the financial statements become incomparable. Any differences in the financial statements may not be due to changes in the company's performance, but rather due to differences in accounting methods. As a result, users of financial statements cannot accurately compare the company's performance over time.

For example, if a company changes its method of depreciating its assets from the straight-line method to the declining balance method, the financial statements for the current period will not be comparable to those of the previous period. The change in depreciation method will affect the amount of depreciation expense recorded, which could have a significant impact on the company's reported profits.

Conclusion:

In conclusion, the consistency concept is crucial for ensuring that financial statements are comparable across different accounting periods. This allows users to make informed decisions based on the financial statements and draw accurate conclusions about a company's financial performance. Therefore, comparing financial statements of one accounting period with that of another accounting period is possible only when the consistency concept is followed.

Answer

By following the consistency concept,, it allows the user to compare the previous yr situation with the current one,,, for example using slm Dep method from last three years

Answer

The consistency principle states that, once you adopt an accounting principle or method, continue to follow it consistently in future accounting periods. Only change an accounting principle or method if the new version in some way improves reported financial results.

Answer

In accounting, the consistency principle holds high importance for a number of reasons. Some of which are the following:
Comparable financial information:

By using a consistent accounting method from one accounting period to the next, the financial reports will all hold a similar structure. This makes it easier for bankers, managers, creditors, and other stakeholders to compare the performance of the business over different financial years.

Familiarisation:

A consistent accounting method can be both cost and time efficient. Accountants and managers will become familiar with the accounting method, and by being consistent, you will only require the initial training for this method.

Auditors:

Auditors are external individuals who are trained to make sure the accounting data provided by a company corresponds to the activities of that company. Following the consistency principle, auditors will demand reasons for any changes that could affect the interpretation of the financial statements of

Similar CA Foundation Doubts

To achieve comparability of the financial statements of an enterprise, the same accounting policies should be followed from one period to another period due to ________ concept.

Consistency concept states that accounting principle and methods should remain constant from one year to another.in above statement,is the word "methods" used for accounting standards?first of all answer in yes or no. then explain in easiest words.?

Contingent asset is not recognized in the finantial statement on the basis of . accounting concept. { A. Prudence | B. Materiality | C. Substance over form | D. Going concern }

Contingent asset is not recognized in the financial statements on the basis of ______ accounting concept

Contingent asset is not recognized in the financial statements on the basis of ______ accounting concept

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