A Company Decides to Ignore a Very Small Error in Their

question 111

Multiple Choice

A company decides to ignore a very small error in their inventory balance. This is an example of application of the:

• A)accounting conservatism.
• B)materiality concept.
• C)disclosure principle.
• D)consistency principle.

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Definitions:

Current Assets

Cash and other assets that are expected to be converted to cash or sold or used up, usually within one year or less, through the normal operations of the business.

Total Manufacturing Costs

The aggregate of expenses related to producing goods, including raw materials, labor, and overhead costs.

Work in Process Inventory

Products that are in the manufacturing process but are not yet complete, considered a current asset on the balance sheet.

Gross Profit

The difference between sales revenue and the cost of goods sold, before deducting overheads, taxes, and interest payments.