A company decides to ignore a very small error in its inventory balance.This is an example of which of the following principles?

Question

Quizplus · Accepted Answer

The materiality concept in accounting states that insignificant errors or omissions may be ignored if they are not significant enough to influence the decision of a financial statement user. Therefore, ignoring a very small error in inventory balance is an example of applying the materiality concept. The relevance principle focuses on including information that affects user's decisions, the comparability principle ensures consistency in reporting between periods, and the accounting conservatism principle dictates that losses should be recognized immediately but gains should not be recognized until they are realized.

A Company Decides to Ignore a Very Small Error in Its