Accounting Conventions - 1. Convention of Materiality:

Accounting Conventions - 1. Convention of Materiality:

     This convention means that, in accounting, a detailed record is made only of those business transactions which are material (i.e., important). No detailed record is made of transactions which are trivial (i.e., insignificant), as the work of recording the minute details of such transactions is not justified by the usefulness of the results. In the case of such trivial transactions, only a broad view is taken. Let us consider as to how a trivial transaction is recorded in the books of accounts. A new pencil purchased and supplied to the office is, no doubt, an asset for the concern. Everyday when someone in the office writes with the pencil, a portion of the pencil is used up, and as such, the value of the pencil decreases. Theoretically, it is possible to ascertain daily the part of the pencil that is used up and the part that remains. But the cost of such an effort will be very high. So, in accounting, a simpler, though less exact, treatment is given to the pencil. The pencil is taken as used up at the time it is purchased or at the time it is issued to the office.