Which of the Following Is an Example of Using the Materiality

question 159

Multiple Choice

Which of the following is an example of using the materiality concept?

• A)recording significant purchases as assets even though technically they are considered expenses
• B)recording insignificant purchases as expenses even though technically they are considered assets
• C)not recording insignificant purchases at all
• D)recording insignificant liabilities as assets

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Definitions:

Principal Balance

The remaining amount of money borrowed or invested, excluding any interest or fees.

Compounded Semi-annually

Interest on an investment or loan is calculated and added to the principal twice a year.

Amortization Schedule

A table detailing each periodic payment on an amortizing loan, showing amounts toward principal and interest and the remaining balance after each payment.

Compounded Semi-annually

An interest calculation method in which interest is added to the principal balance twice a year, leading to exponential growth.