Question

Explain the Materiality concept with examples

Answer 1

Answer:

Materiality is a concept in financial accounting and reporting that firms may disregard trivial matters, but they must disclose everything that is important to the report audience. Items that are important enough to matter are material items . A classic example of the materiality concept is a company expensing a $20 wastebasket in the year it is acquired instead of depreciating it over its useful life of 10 years. The matching principle directs you to record the wastebasket as an asset and then report depreciation expense of $2 a year for 10 years.

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