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P2 C6 Conventions, Assumption. Concepts and Principles ofAccounting — Account STD 11 Commerce — Question

Gujarat BoardEnglish MediumSTD 11 CommerceAccountP2 C6 Conventions, Assumption. Concepts and Principles ofAccounting3 Marks
Question
Explain the concept of consistency with example.
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Answer

The principle of consistency suggests that while writing accounts or for preparing financial statements, the same policies, procedures and methods should be followed every year. It should use the same method for all subsequent events of the same type of periods. Example : $(1)$ Valuation of assets and depreciation should be done by applying same method for every year. e.g. Reducing balance method. $(2)$ The method of stock valuation should be followed every year. e.g. $FIFO$ method or $LIFO$ method or everage method. $(3)$ Fixed assets are valued at cost whereas inventory or stock in trade is valued at cost. Here there is no violation of principle of consistency.

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