(64)-THE CONSISTENCY CONCEPT

The Consistency Concept

The consistency concept states that similar items should be accorded similar accounting treatments.

Accounting is not an exact science. There are many areas in which judgment must be exercised in attributing money values to items appearing in accounts. Over the years certain procedures and principles have come to be recognized as good accounting practice, but within these limits there are often various acceptable methods of accounting for similar items.

The consistency concept states that in preparing accounts consistency should be observed in two respects.

1. Similar items within a single set of accounts should be given similar accounting treatment.
2. The same treatment should be applied from one period to another in accounting for similar items. This enables valid comparisons to be made from one period to the next (sometimes this called the comparability concept).

Consistency has been sidelined to a certain extend by financial reporting standards. In financial reporting standards is more consider which accounting policy is most appropriate and then apply this policy to give a true and fair view. Changing an accounting policy may contradict the consistency concept.