Which financial statement assumption relates to the procedure where a $200 paper shredder with a five-year useful life is treated as an expense?
A) Monetary
B) Accounting period
C) Materiality
D) Historical cost

Question

Quizplus · Accepted Answer

The materiality principle allows businesses to disregard GAAP rules for small amounts that would not influence decisions of a reasonable person. In this case, expensing a low-cost, long-life item like a paper shredder instead of capitalizing and depreciating it over its useful life is an application of the materiality principle, as the cost is relatively insignificant and treating it as an expense simplifies the accounting process.

Which Financial Statement Assumption Relates to the Procedure Where a $200