Which of the Following Is a Difference Between Conservatism Principle

question 42

Multiple Choice

Which of the following is a difference between conservatism principle and materiality principle?

• A) Conservatism requires that financial reporting should neither disproportionately overstate nor understate a situation, whereas materiality holds that strict adherence to accounting principles is not required for items of little significance.
• B) Conservatism is listed as a constraint in the conceptual framework determined by the American financial community, whereas materiality is no longer listed as a constraint in the conceptual framework.
• C) Conservatism holds that strict adherence to accounting principles is not required for items of little significance, whereas materiality requires that financial reporting should neither disproportionately overstate nor understate a situation.
• D) Conservatism requires that revenues be measured within the specific reporting period, whereas materiality requires that costs be deducted from the reported revenues to determine the period's net income.

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Definitions:

Aggrieved Purchaser

A buyer who has suffered because of a breach of contract or misrepresentation during a purchase.

Fundamental Breach

A severe violation of a contract that justifies the aggrieved party's right to terminate the agreement and seek damages.

Condition

An essential term of a contract.

Replacement Warranty Clause

A provision in a contract or agreement guaranteeing the replacement of defective goods or services within a specified period.