Define the accounting concept of materiality

Assignment Help Accounting Basics

Reference no: EM132741991

Question -

(a) "The statement of financial performance and financial position contains only past information, and therefore are not very relevant for decision making." Discuss.

(b) "It is possible for an entity to build up hidden amount of profit (known as secret reserves) by making some adjustments in the profit and loss account (Income Statement)." Discuss.

(c) In recent years there have been attempts to place a value on the "human assets" of a business in order to drive a figure that can be included on the statement of financial position. Do you think humans should be treated as assets?

Would "human assets" meet the conventional definitions of an asset for inclusion on the statement of financial position? Why do you say that?

(d) Define the accounting concept of materiality. Then, state THREE example of how this accounting concept can be applied in the financial statements.

Reference no: EM132741991

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