Entity A, a big corporation, purchases a calculator for P500. Entity A immediately charges the cost as expense. This is acceptable under which of the following concepts?

Understand the Problem

The question is asking us to identify the accounting concept that allows Entity A to treat the purchase of a calculator as an expense immediately rather than capitalizing it. This involves understanding relevant financial accounting principles.

More Information

Materiality allows small items like calculators, which don't significantly impact financial statements, to be expensed immediately.

Tips

A common mistake is to think of cost-benefit or prudence, but these don't directly address the significance of amounts on financial statements.

Sources

• SOLUTION: Financial Accounting and Reporting Quiz - Studypool - studypool.com
• Chapter 2: Accounting Concepts and Principles Flashcards by Tina A - brainscape.com