Final answer:
A company ignoring a small error in inventory balance exemplifies the materiality concept, which allows minor non-significant figures to be disregarded in financial statements. Option B is correct.
Step-by-step explanation:
When a company decides to ignore a very small error in its inventory balance, this is an example of the application of the materiality concept. The materiality concept is a principle in accounting that suggests that relatively minor figures which do not significantly affect users' decisions can be disregarded.
In the context of financial statements, only information that is deemed to be material, or significant, must be strictly accounted for and presented. The decision to overlook a small error implies that the error is not material enough to affect the decision-making of the users of the financial statements.