MAX Auto Repair has implemented a policy that requires all expenditures below $10 to be expensed.This is an application of
A)The full disclosure principle
B)The matching principle
C)The materiality constraint
D)Representational faithfulness

Question

Quizplus · Accepted Answer

The policy of MAX Auto Repair, which requires all expenditures below $10 to be expensed, is an application of the materiality constraint. The materiality constraint states that financial information must be disclosed if it would influence the decisions of users of the financial statements. In this case, the policy recognizes that expenses below a certain threshold ($10) are not material to the overall financial picture of the company, and therefore, do not need to be separately disclosed.

MAX Auto Repair Has Implemented a Policy That Requires All