Question

The application of the consistency principle requires that: options:

a) actual or nominal cash flows are discounted using a nominal required rate of return

b) real cash flows use a real rate of return

c) both a and b

d) none of the above.

Answer 1

d) None of the above

Why? Lets discuss

CONSISTENCY PRINCIPLE

The consistency principle is that once the company decided to adapt some accounting method or principle to use in your business, then you should follow that particular method or principle through out the year or that accounting period. Here strictly no method is used but once a method is choosen then there should be the consistency. It means don't change from time to time.The consistency principle is one of the guidelines and standards which businesses are required to follow. The main purpose behind this principle is to ensure that transactions or events are recorded in the same way through out the period. So here it is not important that whether which method should be used.

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