In our everyday life, it is common for us to round off numbers. For example, I bought a mini bag that was worth $99.90, and the cash I gave to the cashier was $100.00. I walked off the store not expecting to given a change anymore knowing that $0.10 was an insignificant amount. Even when do our budget, we round things off because it is a lot easier to remember figures when they are rounded off than figures that have cents in them.
But what about in businesses? Are these so called cents very significant? A very large corporation’s financial statements have the dollar rounded off to the nearest $1,000.00. Why is that? It is because the materiality principle allows such things to occur as long as the digits omitted are quite small in proportion to the real amount, and that no one is misled by such omission of the insignificant digits.