The principle of consistency states that:
A)Companies are prohibited from ever changing their accounting methods.
B)Every company in the same industry must use the same accounting principle.
C)There must be a consistent blend to the accounting principles.
D)If changes in accounting principles are made,the reasons for the change and the effects on the company's net income must be disclosed.

Question

Quizplus · Accepted Answer

The principle of consistency requires companies to use the same accounting principles consistently from one period to another. If changes in accounting principles are made, the reasons for the change and the effects on the company's net income must be disclosed. This ensures that the users of financial statements can compare results from different periods and make informed decisions based on reliable information. Option A is incorrect because companies are allowed to change their accounting methods if it results in better financial reporting. Option B is incorrect because companies are allowed to use different accounting principles as long as they are consistent in their use. Option C is unclear and does not accurately reflect the principle of consistency.

The Principle of Consistency States That