Some companies choose to avoid assigning incidental costs of acquiring merchandise to inventory by recording them as cost of goods sold when incurred.The principle that supports this is called:
A)The expense recognition principle.
B)The materiality constraint.
C)The cost principle.
D)The conservation constraint principle.
E)The lower of cost or market principle.

Question

Quizplus · Accepted Answer

The materiality constraint allows companies to disregard certain accounting principles if the effect of following them is not material to the financial statements. In this case, if the incidental costs of acquiring merchandise are not significant, companies may choose to expense them immediately under the materiality constraint rather than capitalizing them as part of inventory cost.

Some Companies Choose to Avoid Assigning Incidental Costs of Acquiring