GENERAL KNOWLEDGE

STATIONERY WHICH WILL BE USED OVER A LONG PERIOD OF TIME IS USUALLY RECORDED AS AN EXPENSE INSTEAD OF AN ASSET. THIS CONCEPT IS CALLED

  • A. entity
  • B. accrual
  • C. realization
  • D. materiality ✓

 

The answer to the question is: D. materiality

The concept of recording stationery used over a long period of time as an expense instead of an asset is related to the accounting principle of materiality. Materiality refers to the significance or importance of an item or event in financial reporting. It guides accountants and auditors in determining whether a particular item should be recorded as an asset or expense.

When it comes to stationery, the cost of individual items such as pens, pencils, paper, and other office supplies is usually considered immaterial in the context of a company’s overall financial position. As a result, these items are typically expensed as they are used, rather than being recorded as assets on the balance sheet. This approach simplifies accounting processes and aligns with the materiality principle, which allows for the expedient treatment of small, insignificant items.

The concept of materiality is crucial in accounting as it helps ensure that financial statements provide relevant and reliable information to users. By focusing on material items and events, financial reporting can avoid unnecessary complexity and excessive detail while still capturing the essential economic activities of an organization.

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