Question

Which accounting concept focuses on the size of amounts on the financial statements to determine their...

Which accounting concept focuses on the size of amounts on the financial statements to determine their importance?

A-Conservatism

B-Entity Concept

C-Historical Cost

D-Materiality

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Answer #1

Answer is D – Materiality

Conservatism principle is all about recognising expenses and liabilities as soon as possible and recording assets and revenues only when they are certain. Entity concept is about recording business transactions separately from those of owners of the business. The entity and its owners are regarded as separate. Historical cost is recording of transactions at original cost in the financial statements

Materiality deals with size of amounts on the financial statements to determine their importance. Materiality varies from entity to entity and depends on the professional judgement.

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