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← Chapter 2 · Source Documents
In these notes · Objectivity Theory and Source Documents
2.1Types of Business Transactions2.2Source Documents2.3Objectivity Theory and Source Documents2.4The Accounting Cycle (Overview)Chapter Summary
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2.3

Objectivity Theory and Source Documents

Key Concepts

The use of source documents is directly linked to the objectivity theory.

Objectivity theory:

Transactions must be recorded based on information that is reliable and verifiable, free from personal opinions and biases.

Source documents are that verifiable evidence. Without them, accounting records would rely on memory or personal estimates — which cannot be checked or proven.

This is why exam questions often pair "source documents" with the objectivity theory — the two go together.

Cher
How to Remember

Objectivity = no bias, no guessing. Every transaction needs verifiable evidence to be recorded objectively. Source documents are exactly that — they are the proof a transaction happened.

No source document → no verifiable evidence → objectivity theory is violated.

Worked Example
Scenario: Redhill Supplies sold goods to Ravi for $500. The owner, Wei Jie, did not issue an invoice — he relied on his memory and recorded the sale at the end of the day based on his recollection.

Which accounting theory has been violated, and why?

The objectivity theory has been violated. Accounting transactions must be recorded based on reliable and verifiable evidence, free from personal opinions and biases. By relying on memory instead of an invoice, Wei Jie's record cannot be independently verified — it is based on personal recollection, which may be inaccurate or biased. The sale should have been supported by an invoice issued at the time of the transaction.

Common Mistakes
1

Confusing objectivity theory with the professional ethic of objectivity. They share a name but are different concepts.

  • The professional ethic of objectivity (Chapter 1) is about an accountant's personal judgement not being influenced by others.
  • Objectivity theory is an accounting theory about using verifiable evidence to record transactions.
2

Giving a vague reason for using source documents. Answers like "to keep records" or "because it is required" do not earn marks. The answer must link source documents to the objectivity theory: transactions must be recorded based on reliable and verifiable information, free from personal bias.

Check Your Understanding
Which accounting theory requires businesses to use source documents when recording transactions?
Reveal answerHide answer
The objectivity theory — transactions must be recorded based on reliable and verifiable evidence, free from personal opinions and biases.
True or false: Source documents are only required for credit transactions.
Reveal answerHide answer
False. Source documents are required for all transactions — both cash and credit — because all transactions must be supported by verifiable evidence.
Siti's business records a purchase based on the owner's memory because the invoice was misplaced. Which theory has been violated, and why?
Reveal answerHide answer
The objectivity theory has been violated. Without the invoice, the record is based on personal recollection rather than reliable, verifiable evidence.