The consistency principle:

Question

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The consistency principle requires a company to use the same accounting methods and procedures from one accounting period to the next, in order to ensure comparability and consistency in financial reporting. This can help investors and other stakeholders make informed decisions based on reliable and consistent financial information. A company cannot change its cost flow assumption period after period in order to manipulate its income statement, as this would violate the consistency principle and also be considered unethical. Option A and D are incorrect because they suggest using different cost flow assumptions for tax or income statement purposes, which is not consistent with GAAP. Option B is incorrect because it refers to a similar but distinct principle known as the matching principle, which requires expenses to be recorded in the same period as the revenues they generate. Option C is also incorrect because it allows a company to use only one cost flow assumption exclusively, which is not a requirement under GAAP.

The Consistency Principle