Materiality concept, Accounting Basics

Assignment Help:

Materiality Concept:

There are several events in business that are trivial or insignificant in nature. The cost of reporting and recording such events will not be justified through the usefulness of the information derived. The materiality concept holds such items of small importance require not be specified strict theoretically accurate treatment. For illustration, a paper stapler costing Rs. 30 may last for three years. Though, the effort included in allocating its cost over the three-year period is not worth the profit than can be derived from this operation. As the item clearly is immaterial when associated to overall operations, the cost incurred on this may be reacted as the expense of the period wherein it is acquired. Several of the stationery purchased for office utilize in any accounting period may continue unused at the end of such period. In accounting, the amount spent in the entire stationery would be reacted as an expense of the period wherein the stationery was purchased, notwithstanding the actuality that a tiny part of it still lies in stock. The value or cost of the stationery lying in stock would not be reacted as an asset and carried forward like a resource to the subsequently period. The accountant would regard the stock lying not used as immaterial. Thus, all amount spent on stationery would be considered as the expense of the period wherein such expense was incurred.

Where to sketch the line in between immaterial and material events is a matter of judgment and common sense. There are no rigid rules in this respect. Whether a specific item or occurrence is material or not, must be determined by considering its association to the other items and the surrounding conditions. This is desirable to establish and obey uniform policies governing such matters.


Related Discussions:- Materiality concept

Money measurement concept, In accounting, only those facts that can be expr...

In accounting, only those facts that can be expressed in terms of money are recorded. When money is accepted not merely as a medium of exchange but also as a measuring rod of value

Suspense account, Which type of error would cause an entry in the suspense ...

Which type of error would cause an entry in the suspense account? A. A page total from the purchases journal was posted as $9780 rather than the correct figure of $9870. B. C

Taxation 1, How are gains from the sale of § 1244 stock treated? Gains on ...

How are gains from the sale of § 1244 stock treated? Gains on the sale of § 1244 stock is treated as

Prepare journal entries to record transactions, On January 1, 2012, Magnus ...

On January 1, 2012, Magnus Corporation had 60,000 shares of $1 par value common stock issued and outstanding. During the year, the following transactions occurred: Mar. 1

Explain about representational faithfulness, Q. Explain about Representatio...

Q. Explain about Representational faithfulness? Representational faithfulness To increase insight into this quality considers a map. When it shows bridges and roads where roads

Assets liabilities, decrease in owners equity decrease in owener''s equity

decrease in owners equity decrease in owener''s equity

Business transactions and the accounting equation, Business transactions an...

Business transactions and the accounting equation A transaction is any activity which changes the value of a firm's assets, liabilities or owner's equity. Every transaction

The greenwood company purchased equipment costing, The Greenwood Company pu...

The Greenwood Company purchased equipment costing $900. Greenwood paid $400 in cash and agreed to pay the remaining amount in thirty days. As a result of this transaction

Distinctions between management and financial accounting, Distinctions betw...

Distinctions between management and financial accounting We can observe that management accounting is less constrained than financial accounting. It may draw from a range of s

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd