sir please explain thedifference between materiality principle and relevance concept?
Dear Student,
Materiality principle of accounting demands that all relevant items, the knowledge of which might influence the decision of the user of the accounting information should be disclosed in the financial statements. Relevance means the information provided in the financial statements must be useful and relevant for decision making needs of the users. It is related to the quality aspect of information. Also, we need to mention that 'relevance' as quoted by you above is not an accounting concept rather is one of the qualitative characteristics of the accounting information. However, it is sometimes regarded as an accounting concept due to its close resemblance with the materiality concept. Also, please note that materiality of information is part of relevance itself which is one of the qualitative characteristics of the accounting information. All these are complementary to each other to make accounting information useful for the users of accounting.
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Materiality principle of accounting demands that all relevant items, the knowledge of which might influence the decision of the user of the accounting information should be disclosed in the financial statements. Relevance means the information provided in the financial statements must be useful and relevant for decision making needs of the users. It is related to the quality aspect of information. Also, we need to mention that 'relevance' as quoted by you above is not an accounting concept rather is one of the qualitative characteristics of the accounting information. However, it is sometimes regarded as an accounting concept due to its close resemblance with the materiality concept. Also, please note that materiality of information is part of relevance itself which is one of the qualitative characteristics of the accounting information. All these are complementary to each other to make accounting information useful for the users of accounting.
Keep Posting!!!