The document discusses several key principles of accounting - objectivity, full disclosure, and materiality. It defines each principle and provides examples. The objectivity principle states that financial statements should be unbiased and free from influence. Full disclosure requires providing all relevant financial information to users. Materiality means all reasonably likely information impacting investor decisions must be reported. Accurately applying these principles helps ensure financial statements clearly represent a company's financial position.

1. General
Accepted
Accounting
Principles
Name : Nopy Riza Patricia
NPM : 22.62.201.0006
Lecturer : Deviana Sari, S.E., M.S.AK

2. Objectivity Principle
What is Objectivity Principle?
The objectivity principle in accounting states that financial
statements should be objective, i.e., the accounting information
should be unbiased and free from any external or internal
influence. This helps financial statements to be trustworthy and
useful for evaluation.

3. Principle of Objectivity
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.

4. Importance of Objectivity Concept
Documentary Evidences
Transactions
Each transaction includes a source
document, such as a purchase invoice,
cash receipt, payment voucher, and sales
invoice, which makes the information
provi ded by financial statements reliable.
Better Decisions
The management and other
stakeholders will be able to make
better decisions since the financial
statements will be based on solid
evidence.
Standards of Preparing Financial
Statements
Financial statements will be
prepared according
to GAAP (Generally Accepted
Accounting Principles) standards,
which stress the importance of
objectivity.
Verifies Source
Documents at any Time
and Place
The concept allows and facilitates
verification with source documents,
making it easier to analyse financial
statements over differing periods and
compare them with those of
other firms

5. What Does Objectivity Concept Mean?
The objective concept in accounting refers to the requirement that financial statements are
accurate and that a financial report should be unbiased and independent of internal and
external influences. Rather than simply recording opinions in financial statements, financial
information should be supported by solid evidence. This principle protects the preparation of
financial statements from the influence of management and accountants at any given time.
It is possible, for example, that management accrues revenue associated with a lawsuit
payout, even though the evidence suggests that the payout is unlikely to occur. Rather than
making such a determination based on limited information, it would be more objective to
wait for more details. Management's significant stake in the company can also skew
financial results because they are motivated to report optimistic results, even though a more
objective view would lead to a more conservative report.
When constructing financial statements using an objective viewpoint, the result should be
financial information that investors can rely on to evaluate an organisation's results, cash
flows, and financial position.

6. Full Disclosure Principle
The Principle of Full Disclosure is an accounting
convention that requires a company's financial
statements to provide users with all relevant
information about various transactions involving the
company. The principle of full disclosure is a very
important concept in business ethics and governance
because it can prevent fraud or fraud. If applied
correctly, this principle will help maintain trust with your
shareholders and investors.

7. Benefits of Full Disclosure Principle

8. There are many benefits associated with following the Full Disclosure Principle correctly. This
includes:
• By demonstrating trustworthiness through complete honesty regarding your finances, people may
become more likely to do business with you because they feel confident their investment will
remain safe in your hands.
• This also encourages people to invest in your company because they know that their investment
is secure and likely successful if you are honest with them.
• Your stock will most likely rise due to investors having more confidence in the company’s ability
to do well financially, leading to more money and resources for the company.
• It is also a safer way to do business because full disclosure of information can prevent legal
problems.
• If you are transparent about all your finances, then there is no way to be accused of fraud or
misrepresenting yourself in any way.
• Finally, it can save time and money because legal battles cost lots of both, whereas full disclosure
will prevent those from happening as often.

9. Why Does the Full Disclosure Principle Matter?
When you disclose all relevant information in your financial statements, it demonstrates good faith
and trustworthiness to the people you are doing business with.
If you are concealing important information, it can lead to legal problems and cause your investors
to lose trust in the accuracy of your financial statements.
You also do not want your business to lose the trust of its customers. Suppose you conceal
important information from your investors.
In that case, they may lose trust in your financial statements’ accuracy and integrity, which could
result in a lower stock price or even legal action against you for fraudulently misrepresenting
yourself as being more profitable than you really are.
Another reason is, if you do not disclose all the relevant information, your investors cannot make
good investment decisions.
Lastly, if you do not disclose all the relevant information, your financial statements will be of no
value to investors.

10. WHAT IS MATERIALITY?
Materiality is an accounting principle which states that all items that
are reasonably likely to impact investors’ decision-making must be
recorded or reported in detail in a business’s financial statements
using GAAP standards.
Essentially, materiality is related to the significance of information
within a company’s financial statements. If a transaction or business
decision is significant enough to warrant reporting to investors or
other users of the financial statements, that information is “material”
to the business and cannot be omitted.

11. EXAMPLES OF MATERIALITY
Materiality looks slightly different for each organization, but there are certain scenarios that can
be applied to all businesses.
1. Expensing vs. Depreciating
Imagine a company purchases an electric pencil sharpener for $15. Typically, the sharpener
should be recorded as an asset and then depreciation expense should be recorded throughout
its useful life. However, materiality allows you to expense the entire $15 at once.
In this scenario, you’re able to expense the entire transaction at once because the information is
immaterial. Recording the transaction in this way is unlikely to impact the decision-making
process of investors, therefore the $15 cost of the pencil sharpener is immaterial.
2. Losses Compared to Net Income
If a company were to incur a significant loss due to unforeseen circumstances, whether or not
this loss is reported depends on the size of the loss compared to the company’s net income.

12. PREPARING ACCURATE FINANCIAL STATEMENTS
By considering materiality and other key financial accounting concepts, a company’s
financial statements will be more accurate and ultimately tell a clearer story of its financial
health.
Whether you’re in a financial role or not, it’s important that you can speak to
your organization’s profitability and performance. Knowledge of how to prepare and analyze
financial statements can help you better understand your organization and become more
effective in your role.

13. That's all and
Thank You