Practice Quiz

CPA Accountant Review Questions

Category - Accounting

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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?
  1. The going concern concept
  2. The materiality concept
  3. The money measurement concept
  4. The matching concept
  5. The time is money concept
Explanation
Answer - B - 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.
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