Modifying conventions on materiality, Accounting Basics

Assignment Help:

Q. Modifying conventions on Materiality?

The Materiality is a modifying convention that permits accountants to deal with immaterial (unimportant) items in an expedient however theoretically incorrect manner. The basic question accountants must ask in judging the materiality of an item is whether a knowledgeable user's decisions would be different if the information were presented in the theoretically correct manner. Otherwise the item is immaterial and may be reported in a theoretically incorrect but expedient manner. For example for the reason that inexpensive items such as calculators often don't make a difference in a statement user's decision to invest in the company they are immaterial (unimportant) and may be expensed when purchased. But because expensive items such like mainframe computers usually do make a difference in such a decision they are material important and must be recorded as assets and depreciated. Accountants must record all material items in a theoretically correct manner. They may perhaps record immaterial items in a theoretically incorrect manner merely because it is more convenient and less expensive to do so. For instance they may debit the cost of a wastebasket to an expense account rather than an asset account even though the wastebasket has an expected useful life of 30 years. It merely isn't worth the cost of recording depreciation expense on such a small item over its life.


Related Discussions:- Modifying conventions on materiality

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

Select Topic, A of Surat consigned goods to B of Jaipur to be sold at or ab...

A of Surat consigned goods to B of Jaipur to be sold at or above invoice price. B is entitled to get a commission of 8% on sales at invoice price plus 25% of any surplus price real

The percentage analysis of changes of corresponding items, The percentage a...

The percentage analysis of changes of corresponding items in comparative financial statements is referred to as horizontal analysis. A. True B. Fals

Assets, list me all the asset in the world?

list me all the asset in the world?

What is time orientation - financial accounting, What is Time orientation ...

What is Time orientation Financial accounting reports reflect position and performance of business for the past period. Essentially, they are backward looking. Management accou

Accounting process in operation, Accounting process in operation Micro ...

Accounting process in operation Micro Train Corporation is a small corporation that provides on-site personal computer software training using the clients' equipment. The compa

What do you mean by liabilities, Q. What do you mean by Liabilities? Li...

Q. What do you mean by Liabilities? Liabilities are the debts outstanding by a business. Usually a business should pay its debts by certain dates. A business acquires many of i

Show double-entry procedure or duality, Q. Show double-entry procedure or d...

Q. Show double-entry procedure or duality? In every business transaction we record the total dollar amount of debits must equal the total dollar amount of credits. While we deb

Inventory valuation, The Kauai Surf Company sells high-end surfboards to to...

The Kauai Surf Company sells high-end surfboards to tourists.  The inventory is purchased from a manufacturer in Honolulu.

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