9. Materiality Principles.

The concept of materiality provides that only material information should be disclosed in the financial
statement. Materiality is essentially a matter of professional judgement. The American Institute of
Certified Public Accountant states that a statement, fact or item is material, if giving full consideration to
the surrounding circumstances, as they exist at the time, it is of such a nature, that its disclosure, to the
method of treating it, would be likely to influence or to make, a difference in the conduct and
judgement of a reasonable person. Materiality depends upon the amount involved in the transaction.
For example a small expenditure of Rs.10 for the purchase of a waste paper box may be treated as an
expense rather than asset. Similarly the amounts due to creditors and receivable from debtors are not
disclosed in the balance sheet against their individual names, instead, these accounts are clubbed into
sundry creditors and debtors accounts.