Principle of Consistency- Stay on Track
If you have any say in the decision making process of your business, you know that any good decision is backed up by financial or accounting data. To get that accounting data, accountants need to be consistent with the accounting methods they use. That’s where the principle of consistency comes in. Keep reading to find out more!
As the name implies, the principle of consistency is about being consistent, big shocker. The principle of consistency is one of the ten Generally Accepted Accounting Principles, or GAAP, which are the base rules for accountants. They tell accountants how they should do their job. The principle of consistency in particular tells accountants that when they’re doing their reporting, they should use the same methods throughout accounting periods. This, obviously, makes sense because if you were to use different methods you would get different results, and different results lead to different decisions. As we said before, accounting data is one of the most important elements of good decision-making, and in order to get that data it has to be consistent.
The advantages are pretty obvious, being consistent in how you report and calculate key financial indicators will give you the right numbers. The right numbers will lead you to make the appropriate decisions your business needs at that specific moment, and it goes without saying that the right decisions will help grow your business.
Principle of Consistency- Methods Have a Real Impact
GAAP doesn’t tell accountants exactly what to do, it just gives them general guidelines and some things to avoid. On the same note, the principle of consistency tells accountants to be consistent, to use the same methods and to pick one way they work and stick with it. This way there’s less confusion and less of a chance of a big error that could have drastic consequences on the health and direction of the company.