PRINCIPLES OF ACCOUNTS

IN THE PREPARATION OF FINANCIAL STATEMENTS, FULL DISCLOSURE OF MINOR EVENTS ARE IGNORED IN LINE WITH

  • A. accrual concept
  • B. money measurement concept
  • C. business entity concept
  • D. materiality concept ✓

 

The materiality concept in accounting states that only information that would influence the economic decisions of users should be disclosed in financial statements. Minor events or transactions that are not significant enough to impact the decision-making process of users can be omitted from the financial statements under this concept.

That is to say, the materiality concept states that information is considered material if it would affect the decisions of an informed reader of the financial statements. In other words, information is considered material if it is important enough to impact the overall understanding of the financial statements. Therefore, if an event is considered minor and unlikely to affect the financial statements in a significant way, it may not be disclosed in the financial statements. This helps to simplify the financial statements and focus on the information that is most relevant and important to users.

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