Cheile Transportation purchases many pieces of office furniture with an individual cost below $200 each.Cheile chooses to account for these expenditures as expenses when acquired rather than reporting them as property,plant,and equipment on its balance sheet.The company's accountant and independent CPA agree that no accounting principle has been violated.What accounting justification allows Cheile to expense the furniture?

Question

Quizplus · Accepted Answer

The accounting justification that allows Cheile to expense the furniture is materiality. Materiality refers to the significance or importance of an item and whether it would make a difference to the users of financial statements if it were recorded or not. In this case, since the furniture has individual costs below $200 each, they are considered immaterial and do not need to be recorded as property, plant, and equipment. Instead, they can be expensed when acquired. Both the company's accountant and independent CPA agree that this treatment is appropriate, so no accounting principle has been violated.

Cheile Transportation Purchases Many Pieces of Office Furniture with an Individual