Question

Which principle has important bearing on the capital-revenue classification?

• A. Principle of materiality
• B. Principle of conservation
• C. Principle of consistency
• D. Principle of full disclosure

Answer 1

The correct option is A Principle of materiality

Any fact would be considered as material if it is reasonably believed that its knowledge would influence the decision of informed user of financial statements. when the amount involved is very small, strict adherence to accounting principles is not required. For example, stock of erasers, pencils, scales, etc. are not shown as assets, whatever amount of stationery is bought in an accounting period is treated as the expense of that period, whether consumed or not.