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Nisha Sharma posted an Question
March 13, 2021 • 14:42 pm
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30 points
30 points
- UGC NET
- Commerce
Explain me the concept of material ati modifying principles in accounting and auditing unit
explain me the concept of material ATI modifying principles in accounting and auditing unit
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Ronak kumari upadhyay
Nisha do you want to learn about 'modifying principles of accounting' or anything. can you plz write down ur query again
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yes i want to learn about the concept of materiality
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ok Nisha so here is the easiest explanation. hope you can get it. The concept of materiality requires that in accounting we should focus on material facts. Efforts should not be wasted in recording and presenting those facts, which are immaterial in the determination of income of the business.\n\nNature and the amount involved in a fact determines its materiality. We consider any fact as material if its knowledge will influence the decision of informed user of financial statements.\n\n\n\nFor example:- expenses incurred on creation of additional capacity of a theatre would be a material fact as it is going to increase the future earning revenue of the enterprise.\n\nThe financial statements and the accompanying notes shall disclose the appropriate information about material facts. When the amount involved is very small, strict adherence to accounting principles is not necessary.
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Ronak kumari upadhyay![best-answer]()
Dear Nisha .. trying to explain in simpler words The concept of materiality requires that in accounting we should focus on material facts. Efforts should not be wasted in recording and presenting those facts, which are immaterial in the determination of income of the business. Nature and the amount involved in a fact determines its materiality. We consider any fact as material if its knowledge will influence the decision of informed user of financial statements. For example:- expenses incurred on creation of additional capacity of a theatre would be a material fact as it is going to increase the future earning revenue of the enterprise. The financial statements and the accompanying notes shall disclose the appropriate information about material facts. When the amount involved is very small, strict adherence to accounting principles is not necessary. For example, we do not show stationery items etc. are as assets. Purchase of Stationery in an accounting period is an expense of that period, whether we consume it or not.