GAAP Objectivity Principle

Question 1

GAAP Objectivity Principle

Answer 1

• Accounting will be recorded based on objectivity evidence
• Based on fact, not evidence
• Ensures that different people looking at evidence will reach same conclusion
• Best way to get objective evidence: source document

Question 2

Source Document

Answer 2

• A business paper or document that verifies the transaction and dollar amount (a.k.a. “Original Record”)
• Accounting entries are recorded from - - - Source Documents
• Source Documents are kept on file for reference and proof of transactions (i.e. to check for errors or if audited)
• EXAMPLE: Phone bills, store receipts, cheque copies, purchase orders, pay stub.

Question 3

Transaction

Answer 3

• Any event that affects the assets or liabilities of a company (may alter the financial position of a company)
• How are Assets, Liabilities & Equity affected by these transactions?
• NOTE: At least TWO accounts must ALWAYS be affected