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CMA Foundation · Fundamentals of Financial and Cost Accounting · Accounting Principles, Concepts and Conventions

Meera Textiles of Surat buys office stationery worth Rs 3,000 that will mostly be used up within the year, yet the accountant records the whole amount as an expense instead of showing the unused portion as an asset. Which accounting concept justifies this treatment?

The treatment follows the materiality concept. Because the unused stationery is of insignificant value, the effort of recording it as an asset is not justified, and the whole purchase is written off as an expense in the year without distorting the financial results.

  1. AMaterialityCorrect
  2. BGoing concern
  3. CMoney measurement
  4. DDual aspect

Explanation

Materiality says that items of insignificant value need not be recorded in strict detail. The small cost of stationery makes it unimportant to track the unused balance, so it is charged fully to expense. Going concern concerns continuity of the business, not the treatment of small items.

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