Why is it important to adopt a consistent basis for the preparation of financial statements? Explain.

Explanation

For making the accounting data meaning to its internal and external users, it's necessary that such data is reliable yet as comparable. The equivalence of knowledge is needed each to create interim comparisons, i.e. to envision however a firm has performed as compared to the opposite corporations, yet on build bury amount comparison, i.e. however it's performed as compared to the previous years.


This becomes doable given that, the data provided by the money statements is predicated on consistent accounting policies, principles and practices. Such consistency is needed throughout the method of distinguishing the events and transactions to be accounted for, activity them, act them within the book of accounts, summarizing the results thence and news them to the interested parties. This involves developing a correct theory base of accounting.


The importance of accounting theory needn't be over-emphasized, as no discipline will develop while not a sound theoretical base. the idea base of accounting consists of principles, concepts, rules and pointers developed over a amount of your time to bring uniformity and consistency to the method of accounting and enhance its utility to totally different users of accounting data.


However, consistency doesn't veto modification in accounting policies. Necessary needed changes square measure absolutely disclosed by presenting them within the money statements indicating their probable effects on the money results of business.


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