The Materiality of an Item of Financial Information Refers to the Likelihood

question 1

Multiple Choice

The materiality of an item of financial information refers to the likelihood that its omission or misstatement would affect the decisions of those relying on that information and thus make differing choices if the information had been presented. This concept most closely relates to the

• A) financial magnitude of the item
• B) verifiability of the item
• C) neutrality of the item
• D) confirmatory value of the item

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Definitions:

Average Cost Method

An inventory valuation method that assigns the average cost of all similar items in the inventory until they are sold.

LIFO

LIFO, or Last In, First Out, is an inventory valuation method where the last items to be added to inventory are assumed to be the first ones sold.

Ending Inventory

The total value of a company's merchandise, goods, and products held at the end of an accounting period.

Sales Revenue

The income received by a company from its sales of goods or the provision of services.