The Materiality Constraint

question 127

Multiple Choice

The materiality constraint:

• A)States that an amount can be ignored if its effect on financial statements is unimportant to the user's business decisions.
• B)Requires use of the allowance method for bad debts.
• C)Requires use of the direct write-off method.
• D)States that bad debts not be written off.
• E)Requires that expenses be reported in the same period as the sales they helped produce.

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Definitions:

Good

An item or product that is manufactured or produced for sale, or anything that serves a need or desire.

Right

A moral or legal entitlement to have or obtain something or to act in a certain way.

Central Authority

The main governing body or agency in a political or administrative system responsible for overseeing implementation of certain rules or policies.

Universal Standards

Generally accepted principles or criteria that apply globally across industries, cultures, or systems.