Which principle requires transactions to be supported by tangible proof?

Which principle requires transactions to be supported by tangible proof?

• A. Going concern principle
• B. Revenue recognition principle
• C. Objective evidence principle
• D. Unit of measurement principle

Answer: (C)

The principle that requires transactions to be supported by tangible proof, such as receipts, invoices, or contracts, is the objective evidence principle. This principle emphasizes that records of financial transactions should be verifiable and based on actual evidence. By requiring documentation, it ensures that all financial statements are accurate, reliable, and provide an objective basis for reporting financial results. Tangible proof helps in maintaining transparency and accountability in financial reporting. It builds trust among stakeholders, such as investors and creditors, who rely on these documents to make informed decisions. The objective evidence principle acts as a safeguard against fraud and errors, ensuring that all entries in financial records can be substantiated with reliable documentation. The other principles mentioned, while vital in their contexts, do not specifically address the need for tangible proof of transactions. For example, the going concern principle assesses whether a company is expected to continue operating for the foreseeable future, the revenue recognition principle dictates when and how revenue is recognized, and the unit of measurement principle involves the consistency of measuring financial transactions in monetary terms. However, none of them specifically mandates the requirement of documentation for transactions as directly as the objective evidence principle does.

The principle that requires transactions to be supported by tangible proof, such as receipts, invoices, or contracts, is the objective evidence principle. This principle emphasizes that records of financial transactions should be verifiable and based on actual evidence. By requiring documentation, it ensures that all financial statements are accurate, reliable, and provide an objective basis for reporting financial results.

Tangible proof helps in maintaining transparency and accountability in financial reporting. It builds trust among stakeholders, such as investors and creditors, who rely on these documents to make informed decisions. The objective evidence principle acts as a safeguard against fraud and errors, ensuring that all entries in financial records can be substantiated with reliable documentation.

The other principles mentioned, while vital in their contexts, do not specifically address the need for tangible proof of transactions. For example, the going concern principle assesses whether a company is expected to continue operating for the foreseeable future, the revenue recognition principle dictates when and how revenue is recognized, and the unit of measurement principle involves the consistency of measuring financial transactions in monetary terms. However, none of them specifically mandates the requirement of documentation for transactions as directly as the objective evidence principle does.