Federal Nursing Home Administrator Practice Exam

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What does objective evidence refer to in accounting?

Personal judgment about financial conditions
Accounting records based on independent verification
Financial statements made without any documentation
Estimates based on projected income

The correct answer is: Accounting records based on independent verification

Objective evidence in accounting is defined as accounting records that are based on verifiable and independent data. This type of evidence helps ensure the reliability and authenticity of financial statements and transactions, establishing a clear and defensible basis for financial reporting. For example, invoices, receipts, and bank statements are considered forms of objective evidence because they can be independently verified and provide tangible proof of financial activity. This contrasts with personal judgments or estimates, which may be more subjective and rely heavily on individual interpretation rather than factual data. While other options may have some relevance to accounting, they do not fulfill the requirement of being verifiable or based on independent sources, which is the essence of objective evidence in the field.