What does the consistency principle advocate for in accounting practices?

• A. Changing methods frequently for accuracy
• B. A company should use the same accounting methods over time
• C. Standardization across the industry
• D. Disclosure of all changes made

Answer: (B)

The consistency principle in accounting emphasizes that a company should use the same accounting methods over time. This practice is crucial as it enables the financial statements to be comparable across different periods. When a company consistently applies the same accounting methods, it enhances the reliability of financial information, allowing stakeholders to analyze performance trends effectively without the confusion caused by changing accounting methods.

Maintaining consistency in accounting methods helps to ensure that any changes in financial performance are due to actual operational changes rather than inconsistencies in how financial results are reported. This principle helps facilitate transparency and trust among investors, creditors, and other stakeholders by presenting a clear picture of the company's financial health over time. Additionally, auditors and regulators expect to see consistent accounting practices as a standard for compliance and reporting.