Anvilles Inc.manufactures metal sheets for construction.Mr.Anvilles, the sole shareholder, arranges to transport two hundred metal sheets to the family cottage in Mont Orford.He tells the bookkeeper to record the cost of the metal sheets as cost of goods sold. Which of the following qualitative characteristics of accounting information has not been respected?

Question

Quizplus · Accepted Answer

By recording the cost of the metal sheets as cost of goods sold, Mr. Anvilles has violated the entity concept, which requires that the business and its owner(s) be treated as separate entities. The cost of the metal sheets should be recorded as a personal withdrawal by Mr. Anvilles, not as a business expense. This violates the principle of faithful representation, which requires that financial information be complete, neutral, and free from error. The other qualitative characteristics of accounting information, such as verifiability, relevance, and the unit of measure assumption, are not relevant to this scenario.