Full Disclosure and Materiality Concept of Accounting

Full disclosure concept – Since financial statements contain information which is used by different groups of people such as investors, lenders, supplier, government and others in taking various financial decisions regarding the company. Hence the principle of full disclosure requires that all material and relevant facts concerning financial performance of an enterprise must be fully and completely disclosed in the financial statements and their accompanying footnotes. This is to enable the users to make correct assessment about the profitability and financial soundness of the enterprise and help them to take informed decisions.

Materiality concept – According to this concept accounting should focus on material facts. Efforts should not be wasted in recording and presenting facts, which are immaterial. The materiality of a fact depends on its nature and the amount involved. Any fact would be considered as material if it is rationally believed that its awareness would influence the decision of the person looking into the financial statements of the company. For example information about any change in the method of depreciation adopted would be significant information. In certain cases, when the amount involved is very small,. For example, stock of pens, pencils, are not shown as assets but as revenue expense, then this principal can be violated because this amount is too small for changing the decision of the person looking into the financial statements of the company.

0 comments… add one

Leave a Comment


Related pages


semi finished goods examplesconglomerate diversificationdifferentiate between trade discount and cash discountmerits and demerits of organizational structureconvertible bonds advantagesdisadvantages of slumsdiminishing balance method of depreciationadvantages and disadvantages of jitadvantages and disadvantages of marketing strategywhat is job specialization what are its advantages and disadvantageswhat does the law of diminishing marginal utility statevertical merger companies examplesforfeiting meaninghow to record unearned revenue journal entrygst fullformmerits of urbanisationwhat are the characteristics of a command economya characteristic of capital budgeting isadvantages and disadvantages of process costinglimitation of marginal costingdiversifiable risk definitionadvantages and disadvantages of transfer pricingdisadvantage of command economyexamples of direct taxdisadvantages of commodity exchangewhat are the advantages of autocratic leadershipaccounting treatment of contingent liabilitiesdisadvantages of mergers and takeoversdupont system roean example of complementary goods would betypes of convenience goodscosts of deflationhorizontal communication flowdisadvantages of monopolistic competitionessay on advantages and disadvantages of competitionsubstitutes in economics examplesadvantages and disadvantages of mergers and takeoversexplain debenturessystematic risk vs unsystematicbarter system economycalculation of crr and slrlist and describe some advantages of centrally planned economiesautocratic companiesscope of micro and macro economicswhat is unqualified audit reportthe difference between accounts payable and accounts receivablemonopoly and oligopolyfinancial market segmentationfactoring vs forfaitingadvantages and disadvantages of decentralisationwhat is deferred revenue expenditureindirect quotation exampleunsystematic risk definitionadvantages and disadvantages of traditional bankingovercast meaning in accountingsensex full formadvantage of debit cardexamples of horizontal mergera trial balance is prepared tomeaning of devaluationauthoritarian leadership advantagesexample of perfect competition in the philippineskpo abbreviationexamples of goods with elastic demanddifference between cash credit and bank overdraftcurrent asset turnover ratiofdi ka full formadvantages of conglomerateoverfull demandassumptions of diminishing marginal utilityskimming in marketinglimitations of barter system