The Concept of Materiality

question 46

Multiple Choice

The concept of materiality:

• A)Treats as material only those items that are greater than 2% or 3% of net income.
• B)Justifies ignoring the matching principle or the realization principle in certain circumstances.
• C)Affects only items reported in the income statement.
• D)Results in financial statements that are less useful to decision makers because many details have been omitted.

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Definitions:

Conserve And Administer

The act of preserving resources or assets and managing them responsibly for current and future use.

Chapter 11

A chapter of the U.S. Bankruptcy Code allowing a business to continue operations while reorganizing its debts under court supervision.

Creditors

Individuals or entities to whom money is owed by a debtor.

Court

A governmental institution that has the authority to adjudicate legal disputes between parties and administer justice in civil, criminal, and administrative matters.