The materiality principle permits a business to charge a low-cost stapler directly to expense instead of treating it as a long-term asset because:
Correct answer: A. Its effect is unlikely to influence users' decisions
- A. Its effect is unlikely to influence users' decisions
- B. It has no physical existence in the business
- C. It is always purchased with cash
- D. It must be classified as a liability
Explanation
Materiality allows an item to be treated in a simpler manner when its omission or different classification would not affect users' decisions. Physical existence, payment method and liability status do not determine materiality.
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About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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