Under the objective evidence principle, what is necessary for validating a transaction?

Under the objective evidence principle, what is necessary for validating a transaction?

• A. Subjective opinions
• B. Verification through financial analysis
• C. Concrete evidence or documentation
• D. Trust from stakeholders

Answer: (C)

The objective evidence principle is a key tenet of Generally Accepted Accounting Principles (GAAP), emphasizing the need for transactions to be supported by factual, verifiable evidence. This principle asserts that all financial statements and transactions must be based on objective data rather than personal judgments or opinions. Therefore, concrete evidence or documentation is essential for validating a transaction, as it provides an audit trail that can be independently verified by external parties. Using clear documentation, such as invoices, receipts, contracts, and other tangible records, ensures that all transactions are recorded accurately and fairly, which is crucial for maintaining the integrity of financial reporting. This principle helps to prevent misrepresentation and supports the reliability of financial statements, enabling stakeholders to make informed decisions based on transparent and trustworthy information.

The objective evidence principle is a key tenet of Generally Accepted Accounting Principles (GAAP), emphasizing the need for transactions to be supported by factual, verifiable evidence. This principle asserts that all financial statements and transactions must be based on objective data rather than personal judgments or opinions. Therefore, concrete evidence or documentation is essential for validating a transaction, as it provides an audit trail that can be independently verified by external parties.

Using clear documentation, such as invoices, receipts, contracts, and other tangible records, ensures that all transactions are recorded accurately and fairly, which is crucial for maintaining the integrity of financial reporting. This principle helps to prevent misrepresentation and supports the reliability of financial statements, enabling stakeholders to make informed decisions based on transparent and trustworthy information.