Question

Explain Consistency assumption and Revenue Recognition principle of accounting.

Answer 1

Consistency Assumption: Accounting practices/method once selected and adopted should be applied consistently year after year. Consistency helps in eliminating personal bias in accounting and makes it comparable. The accounting practices may be changed if necessary or required by the law or accounting standards.

Revenue Recognition Principle: According to this principle revenue is considered to have been realised when a transaction has been entered into and the obligation to receive the amount has been established.