The Materiality Constraint

question 71

Multiple Choice

The materiality constraint:

• A) Prescribes that only information that would influence the decisions of a reasonable person need be disclosed.
• B) Means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.
• C) Provides guidance on when a company must recognize revenue.
• D) Prescribes that accounting information is based on actual cost.
• E) Prescribes that a company record the expenses it incurred to generate the revenue reported.

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Definitions:

Variable Cost

Costs that vary directly with the level of production output or volume, such as materials and labor expenses directly involved in product manufacturing.

Volume of Business

The amount of transactions or operations conducted within a specified period by a company, indicating its level of activity or throughput.

Attractive Location

A place deemed desirable due to its advantageous or appealing characteristics, often used in the context of real estate or retail.

Centre-of-Gravity

An optimization technique used in logistics and supply chain management to determine the optimal location of a facility based on minimizing transportation costs, considering the geographic location of suppliers, manufacturers, and customers.