Question

why is the consistency principle important? To what audience is it important?

Answer 1

The consistency principle means, during mainting the books of accounts we should not change principle once selected again and again.That means we should stick with particular method throughout our accounting period.

Following are the importance of Consistency Principle:

a.Eassy to understand -When any organisation follow consistency principle for accounting purpose it easier for Creditor,manager  and other stakeholders to analyse the financial performance of organisation in diffrent accounting period.

b.Consistency principle is cost effective-An organisation which follow consistency principle incurred less cost for maintaining books of accounts compare to organisation which does not follow consistyency principle.

c.Consistency principle is time saving-an organisation which follow consistency approach takes less time to maintain the books of accounts,

d.Consistency principle make audit simple-it is easy to audit the books of accounts where books are maintained on the basis of consistency principle.

Consistency principle is important for following audiance:

A.For Investors

B.For Managers

C,For Parners in case of partnership business

D,For Creditor

E,For Financial Institutions

F.For Debenture Holder

G.For GOvt

H.For Tax Authorities.

I.For Auditors