Accounting data, to the fullest extent possible, should be based on:

(i) Objective determination

(ii) Verifiability

Objective determination means that the accounting should be free from personal bias. Sales transaction is a typical example. Sometimes accounting data has to depend on estimates. For example depreciation expense is based on: (i) the cost of the asset (actual data) and (ii) two estimates namely useful life and scrap value. Objectivity test requires that where estimates are necessary, accountants must adopt a rational and systematic approach based on experience and realistic expectations. Verifiability simply means that accounting information is supported by proper documentary evidence e.g., cash memos, invoices etc.