Question

What is the distinction between comparability and consistency?

Short answer

The difference between comparability and consistency is that comparability refers to the method of comparing two or more companies according to their position. On the other hand, consistency is defined as the similarity in policies and procedures of a firm, which aids the users in comparing the financial statements of a specific accounting period.

Step-by-step solution

Meaning of Accounting Principles

Accounting principles refer to the rules and principles that the company must adhere to while reporting the financial data in the accounting reports. It escorts the companies the way to record theaccounting transactions in the books of accounts.

Difference between Comparability and Consistency

Comparability and consistency differ from each other on the following grounds:

• Comparability provides comparisons between information about two different enterprises at a certain point in time. Whereas consistency is a type of comparability that assists in comparisons between information about the same firm at two different time periods.

• Comparability is the qualitative characteristic that helps users to recognize and understand similarities and differences among items. However, consistency is defined as adopting the same methods for the same items in different accounting periods with a reporting organization.

• In comparability, the quality of information is compared between two or more companies. On the other hand, in the case of consistency, the quality of informationis compared within a single organization from one accounting period to the other.