Question

What is the exception of consistency principle?

Answer 1

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The consistency principle states that, once you adopt an accounting principle or method, continue to follow it consistently in future accounting periods. Only change an accounting principle or method if the new version in some way improves reported financial results.

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Answer 2

Answer:

Prudence Principle

Explanation:

Prudence Principle is the exception to the consistency principle.

• Prudence is also known as "Conservatism Conventions"

• According to prudence, the future is uncertain, an estimate should be made about future events and circumstances.

• Every sincere business person makes an estimate of future losses and then some provisions for it are made.
• One should be careful in making provisions for future losses, as more or fewer provisions than necessary will adversely affect the business, and accounting records will also not indicate an accurate and fair position.
• "Anticipate losses but not future gains, always play safe. "
• Making provisions for bad debts is an example of the Conservatism/ prudence convention.

Hence, in a nutshell, conservatism states as " Anticipate no profit, and provide for all possible losses."

Therefore, Prudence Principle is the exception to the consistency principle.

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