(L.O. 4) When an entity charges the entire cost of an electric pencil sharpener to expense in the period when it was purchased even though the appliance has an estimated life of five years, we have an application of the:

a. matching principle.

b. materiality quality.

c. historical cost principle.

d. expense recognition principle.

Explanation: When an item benefits operations of more than one period, the matching principle will dictate the cost of the item be allocated (spread) systematically over the periods benefited. However, the materiality quality dictates that an immaterial item need not be given strict accounting treatment; it can be given expedient treatment. The cost of a pencil sharpener would obviously be small and thus immaterial.

Consequently, the materiality quality is justification for departure from the matching principle in accounting for the cost of the pencil sharpener. (Solution = b.)