Objectivity Principle (GAAP COMIC)

Objectivity Principle (GAAP COMIC)

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  • This new product is going to be amazing for your company ! I still need to talk to my boss about the final details, but I predict that we will be able to offer about 5000 units for $25 each.
  • That is great to hear! I look forward to doing business with you
  • Hey Barbara, I just talked to our new business partner and he said they will be able to offer about 5000 units for $25 each.  This is a decent offer and we should not miss it !
  • That's great Albert. If you don't mind, can you prepare an income statement to show at our investors meeting tomorrow.
  • Good morning Mr.Investor, did you get a chance to look at the income statement ?
  • Yes Albert. $125,000 in sales already is astonishing ! I look forward to investing  $30,000 in no time. Just give me a couple of days to verify some documents.
  • I am extremely sorry for the inconvenience! I will make sure I confirm with the accountant and inform this to our investor.
  • You cannot include a unjustified sale in the income statement ! Even though our business partners said they would offer the deal, the deal is still not finalized. 
  • Barbara was disappointed that I included a sale in our income statement that has not yet been confirmed. Is that a major issue ?
  • Yes it is. This is because that is against one of the GAAP principles which is the objectivity principle. Information in the financial statement can only be based off solid evidence.
  • That's okay, good job for letting me know. I will still be investing $30,000.
  • I just confirmed with my boss and we are ready to start business at the offer I had discussed with you earlier!
  • Sorry Mr.Investor for including a sale in the income statement with no evidence. I ensure you that our business partners are still offering at the same rate.
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