Concept of materiality:

The concept of materiality is defined as a measurement of an item that influences the decision of the users of the financial statement. It is the situation where the financial information of the organization is considered to be material, from the point of view to prepare the income statement and the balance sheet. This financial information influences the judgment and the knowledge of the person to capture that financial information in the books of account.

There are two types of users of accounting information:

1. Internal users ( Owners, management, employee and workers)

2. External users (Banks and the financial institution, investors, and creditors)