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Define Convention of consistency?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 rakkesh asked almost 3 years ago

Hi, What do you meant by Convention of consistency?Explain briefly.

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7 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Surbhi answered about 2 years ago

In accounting, the convention of consistency is a principle that the same management accounting principles should be used for preparing financial statements over a number of time periods.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 acharya answered over 2 years ago

Hi, For example there are many inventory valuation methods like LIFO, FIFO and average cost method. If you will use same method of inventory valuation of inventory, it will be very good for comparing the financial statement of two or more years. Closing stock affects both profit and loss account and balance sheet. If there will be consistence in its valuation, we can analyze our financial statement very with accuracy

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered over 2 years ago

For example there are many inventory valuation methods like LIFO, FIFO and average cost method. If you will use same method of inventory valuation of inventory, it will be very good for comparing the financial statement of two or more years. Closing stock affects both profit and loss account and balance sheet. If there will be consistence in its valuation, we can analyze our financial statement very with accuracy

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 CA Sandeep Bohra answered over 2 years ago

> Convention of consistency --In accounting, the convention of consistency is a principle that the same management accounting principles should be used for preparing financial statements over a number of time periods. -- Convention of consistency means to use the same accounting methods for making financial statement in different years. --Financial statements of one accounting period must be comparable to another in order for the users to derive meaningful conclusions about the trends in an entity's financial performance and position over time. Comparability of financial statements over different accounting periods can be ensured by the application of similar accountancy policies over a period of time. --A change in the accounting policies of an entity may be required in order to improve the reliability and relevance of financial statements. A change in the accounting policy may also be imposed by changes in accountancy standards. In these circumstances, the nature and circumstances leading to the change must be disclosed in the financial statements. --Financial statements of one entity must also be consistent with other entities within the same line of business. This should aid users in analyzing the performance and position of one company relative to the industry standards. It is therefore necessary for entities to adopt accounting policies that best reflect the existing industry practice.

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Picsjoin 2017224123730582 Archana answered over 2 years ago

Hie Rakesh, - Convention of consistency means to use the same accounting methods for making financial statement in different years. When we use same accounting methods, it is easy for us to compare the financial statements of different years. - For example there are many inventory valuation methods like LIFO, FIFO and average cost method. If you will use same method of inventory valuation of inventory, it will be very good for comparing the financial statement of two or more years. Closing stock affects both profit and loss account and balance sheet. If there will be consistence in its valuation, we can analyze our financial statement very with accuracy

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered almost 3 years ago

This accounting convention proposes that the same accounting principles, procedures and policies should be used consistently on a period to period basis for preparing financial statements to facilitate comparison of financial statements on period to period basis.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 jitendra etikala answered almost 3 years ago

**Convention of Consistency** This accounting convention proposes that the same accounting principles, procedures and policies should be used consistently on a period to period basis for preparing financial statements to facilitate comparison of financial statements on period to period basis. If any changes are made in the accounting procedures or policies, then it should be disclosed explicitly while preparing the financial statements.

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