The consistency concept says a business should treat similar items in the same way from one period to the next. It appears in IGCSE Accounting concept questions, in comparisons of profit between years, and in short explanations of why a change in method must be disclosed.
Check the current Cambridge syllabus for your exam year to see how the concepts are worded. This lesson sits inside concepts, ethics and changing practice.
Why does consistency matter?
Profit is only useful for comparison if both years were measured with the same ruler. If the ruler changes, the difference between the two figures mixes real performance with a change in method.
Depreciation is the clearest place to see this. A machine can be depreciated by the straight-line method or by the reducing balance method. Both are acceptable, but they give different yearly charges, so switching between them moves profit without any change in trading.
How to test a comparison for consistency
- List the methods used for depreciation, inventory valuation and allowances in each year.
- Check whether any method changed. If none did, the comparison is fair.
- If one changed, recalculate the later year using the earlier method.
- Compare the difference between the reported profit and the recalculated profit. That difference is the effect of the change, not of trading.
- State the conclusion in a sentence that mentions the concept by name.
Worked example
Sinar Bakery bought an oven on 1 January 2024 for RM12,000. In both 2024 and 2025 its profit before depreciation was RM18,000.
In 2024 it used straight line at 25% of cost. In 2025 it switched to reducing balance at 25%.
Step 1, 2024 depreciation (straight line): 12,000 × 25% = RM3,000. Profit = 18,000 − 3,000 = RM15,000.
Step 2, 2025 depreciation as reported (reducing balance): carrying amount at the start of 2025 = 12,000 − 3,000 = 9,000. Depreciation = 9,000 × 25% = RM2,250. Reported profit = 18,000 − 2,250 = RM15,750.
Step 3, 2025 depreciation using the same method as 2024: 12,000 × 25% = RM3,000. Consistent profit = 18,000 − 3,000 = RM15,000.
Step 4, the effect of the change: 15,750 − 15,000 = RM750. As a percentage of 2024 profit, 750 ÷ 15,000 = 5%.
Conclusion: the reported profit rose by 5%, but trading was exactly the same in both years. The whole rise comes from the change from straight line to reducing balance, so the comparison breaks the consistency concept unless the change is disclosed and explained.
| 2024 | 2025 as reported | 2025 consistent | |
|---|---|---|---|
| Profit before depreciation (RM) | 18,000 | 18,000 | 18,000 |
| Depreciation (RM) | 3,000 | 2,250 | 3,000 |
| Profit (RM) | 15,000 | 15,750 | 15,000 |
The mistake to watch for
A common answer to a question like this is: “Profit increased from RM15,000 to RM15,750, so the bakery performed better.”
Why it goes wrong: the answer reads the two profits as if they were measured the same way. The only thing that changed is the depreciation method. Sales and costs were identical.
The correction is to ask first, “Was the same method used in both years?” Only after that is a statement about performance safe. A good answer names the concept, shows the RM750 effect, and says the comparison is not like for like.
Check yourself
1. A shop buys equipment for RM8,000 and uses 20% reducing balance. Calculate depreciation for year 1 and year 2.
Show answer
Year 1: 8,000 × 20% = RM1,600. Carrying amount = 6,400.
Year 2: 6,400 × 20% = RM1,280.
2. In question 1, if the shop had used 20% straight line on cost in year 2, how much more depreciation would it have charged than under reducing balance?
Show answer
Straight line year 2: 8,000 × 20% = RM1,600. Reducing balance year 2: RM1,280. Difference = 1,600 − 1,280 = RM320 more under straight line.
3. Give one situation where a change of method may be justified, and one thing the business should do when it changes.
Show answer
A change may be justified when the way the asset gives value has genuinely changed, for example it now loses value faster in early years. The business should disclose the change and state its effect on profit so readers can compare fairly.
Where this leads next
Consistency has to sit alongside caution. Move on to explaining prudence without deliberate understatement, and test the whole module with the concepts and ethics practice set. The double-entry and ledger trainer lets you rebuild the depreciation entries.
Some students can recite every concept but still lose marks when a question asks them to apply it to figures. That is the kind of gap we look for in online one-to-one Accounting tuition.