1.12

CONSISTENCY

PRINCIPLE

Video of this presentation at…

YouTube Channel for VCE Accounting

© Michael Allison. Author’s permission required for external use.

The Rules of Accounting

Relevance

Reliability

Comparability

Understandability

Entity

Historical cost

Going concern

Reporting period

Monetary unit

Conservatism

Consistency

Qualitative Characteristics Accounting Principles

1.12 CONSISTENCY PRINCIPLE

© Michael Allison. Author’s permission required for external use.

Consistency Principle

1.12 CONSISTENCY PRINCIPLE

Definition:

The accounting methods used by the business should be applied

consistently from one reporting period to another.

This allows comparisons of the firm’s performance to be made over

time.

© Michael Allison. Author’s permission required for external use.

Consistency Principle

Applying the consistency principle

ensures the qualitative

characteristic of comparability

If constant changes were made to how

items were recorded and the methods

used, comparisons over time would be

difficult

1.12 CONSISTENCY PRINCIPLE

$500,000

Purchase Price

$600,000

Value Today

Year 1

Purchase PriceValued at…

Year 3

Value Today

Year 2

Value Today

Year 4

Purchase Price

© Michael Allison. Author’s permission required for external use.

Consistency Principle

1.11 CONSERVATISM PRINCIPLE

Building A

Purchase Price Value TodayValued at…

Building B

Purchase Price

Building C

© Michael Allison. Author’s permission required for external use.

TASK

In-class Homework

SQ19 X

SQ20 X