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

Explanation

For making the accounting data meaty to its internal and external users, it's necessary that such data is reliable in addition as comparable. The comparison of data is needed each to form interim comparisons, i.e. to envision however a firm has performed as compared to the opposite companies, in addition on build inhume amount comparison, i.e. however it's performed as compared to the previous years.


This becomes potential providing, the knowledge provided by the money statements relies on consistent accounting policies, principles and practices. Such consistency is needed throughout the method of distinguishing the events and transactions to be accounted for, measurement them, human activity them within the book of accounts, summarizing the results thence and news them to the interested parties. This incorporate 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 speculation base of accounting consists of principles, concepts, rules and tips 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 amendment in accounting policies. Necessary needed changes area unit absolutely disclosed by presenting them within the money statements indicating their probable effects on the money results of business.


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