PRC-1 · Chapter 1 · Question 19 of 100
'BlueSky IT' purchased a simple wastebasket for Rs. 500. Although it will be used for several years, the accountant expensed it immediately rather than capitalizing it. Which accounting concept justifies this practical approach?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Materiality concept
Explanation
The materiality concept allows minor expenditures, like a wastebasket or calculator, to be written off as expenses immediately because their cost is too insignificant to justify the administrative effort of capitalization and tracking.
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