What does the "Consistency Principle" ensure in the adjustment process?

The Consistency Principle is fundamental in accounting as it ensures that a company uses the same accounting methods over time. This consistency allows for the comparability of financial statements from one period to another, providing stakeholders, such as investors and analysts, the ability to evaluate the company’s performance more accurately.

When a company consistently applies accounting methods, it reduces confusion and increases transparency in its financial reporting. For instance, if a company switches between different depreciation methods without valid reason, it could lead to misleading financial results and might misguide stakeholders about the company’s profitability and asset value.

Using the same accounting methods over time enhances the reliability of financial reporting and helps in identifying trends within the business, thus providing valuable insights for decision-making.