A trader paid N15,000 on rent for 15 months but charged N12,000 to the profit and loss Account for the year. This is the concept of
Answer Details
The concept illustrated in the scenario is the concept of "materiality." Materiality is a concept in accounting that states that financial information should be disclosed if its omission or misstatement would affect the decision-making process of users of the financial statements. In this case, the trader paid N15,000 on rent for 15 months, but only N12,000 was charged to the profit and loss account for the year. This could be due to the fact that the remaining N3,000 was considered immaterial and not necessary to be disclosed in the financial statements. This is an example of how the concept of materiality is applied in accounting.