Presented By:Dhirendra Nayak

The criterion of True and Fair in the preparation of Financial Statements is necessary for arriving at a reasonable conclusion on the financial health of the company. This condition brings us to the relative concept of materiality, which by its very nature can be subject to variations. Materiality is a concept or convention within auditing and accounting relating to the importance, significance of an amount, transaction, or discrepancy. The term materiality refers to the relative importance of an item or an event.

According to this convention, only those transactions, important facts and items are shown which are useful and material for the business. The firm need not record events, which are insignificant and immaterial. Such Convention is practiced so as to skip the insignificant details which will burden accounting. The "materiality" convention suggests that this should only be an issue if the judgement is "significant" or "material" to a user of the accounts.