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    Question

    Which concept states that a matter is material if its

    misstatement would reasonably influence the decision of a user of accounts? 
    A Prudence Correct Answer Incorrect Answer
    B Materiality Correct Answer Incorrect Answer
    C Consistency Correct Answer Incorrect Answer
    D Accrual Correct Answer Incorrect Answer

    Solution

    The Materiality concept in accounting states: Information is considered material if its omission or misstatement could reasonably influence the decisions of users of financial statements. Key idea: Only information significant enough to impact decisions must be disclosed clearly. • Prudence → Avoid overstating profits or assets. • Consistency → Same accounting methods used year after year. • Accrual → Income and expenses recorded when earned/incurred, not when cash moves.

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