Can you explain me only with example the flexibility causes being followed of a consistency concept in accounting?

Question

Answer

Flexibility in Accounting:
Flexibility in accounting refers to the ability of an accounting system to adapt to changes in business operations, regulations, and reporting requirements. While flexibility is important for businesses to respond to dynamic environments, it must be balanced with consistency to ensure reliable financial information.

Example:

Let's consider a company that changes its accounting policies frequently to show higher profits. While this may provide flexibility in presenting financial statements, it can lead to inconsistency in reporting over time.

Consistency Concept:
The consistency concept in accounting requires companies to use the same accounting methods and principles from period to period, ensuring comparability and reliability in financial reporting.

Example:

By following the consistency concept, the company ensures that investors and stakeholders can trust the financial information provided, as it is presented in a uniform and consistent manner.

Importance of Following Consistency Along with Flexibility:
While flexibility allows for adaptation to changes, consistency ensures reliability and comparability in financial reporting. By maintaining consistency in accounting policies and methods, companies can build trust with stakeholders and make informed decisions based on reliable financial information.

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