What does consistency in accounting mean?

Consistency in accounting refers to the application of the same accounting principles from year to year. This concept is crucial as it allows for comparability of financial statements over different periods, enabling stakeholders, such as investors and management, to track a company's performance and make informed decisions based on consistent data.

When the same accounting practices are applied consistently, it eliminates fluctuations or variations that could arise from changes in methods. For example, if a company uses a specific method for recognizing revenue, maintaining that method across reporting periods ensures that any changes in revenue figures truly indicate changes in business performance rather than a result of differing accounting treatments.

This consistent application supports transparency and reliability in financial reporting, which is fundamental for building trust with investors and complying with regulatory requirements. Having consistent accounting policies also simplifies audits and reviews, as auditors can more easily assess the financial statements when they follow the same rules over time.