Question

Discuss the accounting concept of materiality.

Answer 1

Materiality states that all material facts must be a part of the accounting process. But immaterial facts, i.e. insignificant information should be left out. Efforts should not be wasted in recording and presenting facts, which are immaterial in the determination of income. The materiality of a transaction will depend on its nature, value, and its significance to the external user. If the information can affect persons investing decision then it is definitely a material fact.