A Company Decides to Ignore a Very Small Error in Their

question 48

Multiple Choice

A company decides to ignore a very small error in their inventory balance.This is an example of which of the following principles?

• A) Accounting conservatism
• B) Materiality concept
• C) Disclosure principle
• D) Consistency principle

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Definitions:

Total Sales

The aggregate revenue a company generates from selling goods or services within a specified period.

Fixed Costs

Costs that do not fluctuate with changes in production level or sales volume, such as rent, salaries, and insurance.

Margin Of Safety

The difference between actual or expected sales and the break-even point, indicating the level of risk in failing to cover fixed costs.

Breakeven

The point at which total costs and total revenue are equal, resulting in no net loss or gain.