The materiality principle:
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

Question

Quizplus · Accepted Answer

The materiality principle states that an amount can be ignored if its effect on financial statements is unimportant to the user's business decisions. This means that insignificant amounts need not be disclosed or reported separately. The principle aims to ensure that financial statements provide relevant and reliable information to users without unnecessary clutter or detail.

The Materiality Principle