Doug's Doohickeys sells hardware. His sales have finally reached $1,000,000 annually after years of hard work. Now his accountant has discovered a mistake-Doug misclassified a $2 expense several months ago. His accountant decides to ignore it. What accounting concept does he use to justify this?

Question

Quizplus · Accepted Answer

The materiality concept justifies the accountant's decision to ignore the $2 misclassification.
Key Takeaway: The materiality concept attaches importance to material details and ignores insignificant details. The significance of a detail is based on the size of the operation. With a company that is recognizing over $1,000,000 in sales, the $2 expense is deemed immaterial.

Doug's Doohickeys Sells Hardware