The Materiality Principle

question 112

Multiple Choice

The materiality principle

• A) States that an amount can be ignored if its effect on financial statements is unimportant to the user and permits use of the direct write-off method
• B) Permits use of the direct write-off method
• C) Prohibits use of the direct write-off method
• D) States that an amount can be ignored if its effect on financial statements is unimportant to the user
• E) Both permits and prohibits use of the direct write-off method

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Definitions:

Bylaws

Written rules and regulations that govern the internal management of an organization, corporation, or entity.

Stockholders

Individuals or entities that own one or more shares of stock in a corporation, giving them a right to a portion of the corporation's profits and assets.

Unanimous Vote

A voting outcome where all members of a group fully agree on a decision or proposal.

Two-thirds

A fraction that represents 66.67 percent of a whole, often used as a voting threshold to pass significant decisions in various forums.