Definition and Explanation

The principle of objective evidence (or principle of objectivity) states that no accounting record should be created unless it is supported by independently verifiable (i.e., objective) evidence.

Generally, such evidence is in writing or should be reduced to writing before an accounting entry is made.

All transactions must be evidenced by a document. For example, cash sales are evidenced by cash memos, credit sales by invoices, and payments through the bank by check.

Purchase of larger value such as land, building, and vehicles are generally supported by elaborate legal documentation, including title deeds, sale deeds, and so on.

If the principle of objective evidence is not adhered to, the accounting records will lose their credibility, and financial statements will fail to present a true picture of the business.

Frequently Asked Questions

What is the principle of objective evidence?

The principle of objective evidence states that no accounting record should be created unless it is supported by independently verifiable (i.E., Objective) evidence. Generally, such evidence is in writing or should be reduced to writing before an accounting entry is made. All transactions must be evidenced by a document. For example, cash sales are evidenced by cash memos, credit sales by invoices, and payments through the bank by check.

What is accounting evidence?

Accounting evidence is any tangible object or recorded fact that provides support for an accounting entry in the books of accounts. The book entries should be supported by appropriate evidences; otherwise they are not trusted by the users.

What are the examples of accounting evidence?

Examples of accounting evidence: cash memo, cheque, bank deposit slip and paid bills.

When do we need to follow principle of objective evidence?

We should follow the principle of objective evidence in almost all cases because without it we will not be able to prove the existence of particular transaction for which an entry is made in books, hence it may lead to doubt and cause serious confusion among others.

What is the principle of competence?

The principle of competence states that only those having adequate knowledge, training and experience should be appointed for preparing accounting records. Such persons are said to have "competence."

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