The materiality constraint:
A) States that an amount can be ignored if its effect on financial statements is unimportant to 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 constraint states that an amount can be ignored if its effect on financial statements is unimportant to user's business decisions, meaning that insignificant amounts can be omitted from financial statements to avoid cluttering them with unnecessary information.

The Materiality Constraint