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Chapter 1: Q2TI. (page 11)

Match the accounting terminology to the definitions. 7. Cost principle a. oversees the creation and governance of accounting standards in the United States 8. GAAP b. requires an organization to be a separate economic unit 9. Faithful representation c. oversees U.S. financial markets 10. SEC d. states that acquired assets and services should be recorded at their actual cost 11. FASB e. creates International Financial Reporting Standards 12. Monetary unit assumption f. the main U.S. accounting rule book 13. Economic entity assumption g. assumes that an entity will remain in operation for the foreseeable future 14. Going concern assumption h. assumes that items on the financial statements are recorded in a monetary unit 15. IASB i. requires information to be complete, neutral, and free from material error

Short Answer

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The correct options are matched as follows:

Step by step solution

01

Explanation on Cost Principle

As per the cost principle, assets or services purchased should be recorded at the actual cost of purchase.

02

Explanation on GAAP

GAAP stands for 鈥淕enerally Accepted Accounting Principles鈥� which provides the guidelines for accounting information. It is the main book of accounting rules in the U.S.

03

Explanation on faithful representation

As per faithful representation principle, information presented in the statement should be complete, neutral, and should be error free.

04

Explanation on SEC

SEC stands for 鈥淪ecurities and Exchange Commissions鈥�. It is the agency formulated by the U.S. government, which oversees the financial markets of the U.S.

05

Explanation on FASB

FASB stands for 鈥淔inancial Accounting Standards Board鈥�. It is the organization which is privately funded and responsible for creation and governance of the standards of accounting.

06

Explanation on monetary unit assumption

As per monetary unit assumption, items valued in terms of monetary terms only should be recorded in the financial statements.

07

Explanation on economic entity assumption

As per economic entity assumption, businesses have separate legal entity as compared to the actual owner.

08

Explanation on going concern assumption

As per going concern assumption, business will continue to be in operation for the foreseeable future.

09

Explanation on IASB

IASB stands for 鈥淚nternational Accounting Standards Board鈥�. It is responsible for publishing IFRS.

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Most popular questions from this chapter

Conner Thomas started a new business, Thomas Gymnastics, and completed the following transactions during December: Dec. 1 Received \(19,000 cash from Conner in exchange for common stock. 2 Received \)3,800 cash from customers for services performed. 5 Paid \(200 cash for office supplies. 9 Performed services for a customer and billed the customer for services rendered, \)4,500. 10 Received \(200 invoice for utilities due in two weeks. 15 Paid for advertising in the local paper, \)250. 20 Paid utility invoice received on December 10. 25 Collected cash in full from customer billed on December 9. 28 Paid rent for the month, \(1,600. 28 Paid \)1,450 to assistant for wages. 30 Received \(1,400 cash from customers for services performed. 31 Cash dividends of \)3,500 were paid to stockholders. Analyze the effects of the transactions on the accounting equation of Thomas Gymnastics using a format similar to Exhibit 1-6.

Annette Pachelo recently opened her own law office on March 1, which she operates as a corporation. The name of the new entity is Annette Pachelo, Attorney. Pachelo experienced the following events during the organizing phase of the new business and its first month of operation, March 2018. Some of the events were personal and did not affect the law practice. Others were business transactions and should be accounted for by the business. Mar. 1 Sold personal investment in Amazon stock, which she had owned for several years, receiving \(35,000 cash. 2 Deposited the \)35,000 cash from the sale of the Amazon stock in her personal bank account. 3 Deposited \(73,000 cash in a new business bank account titled Annette Pachelo, Attorney. The business issued common stock to Pachelo. 5 Paid \)700 cash for ink cartridges for the printer. 7 Purchased computer for the law office, agreeing to pay the account, \(5,000, within three months. 9 Received \)2,800 cash from customers for services rendered. 15 Received bill from The Lawyer for magazine subscription, \(400. (Use Miscellaneous Expense account.) 23 Finished court hearings on behalf of a client and submitted a bill for legal services, \)10,000, on account. 28 Paid bill from The Lawyer. 30 Paid utilities, \(1,200. 31 Received \)3,300 cash from clients billed on March 23. 31 Cash dividends of $5,500 were paid to stockholders. Requirements 1. Analyze the effects of the preceding events on the accounting equation of Annette Pachelo, Attorney. Use a format similar to Exhibit 1-6.

Identifying accounts Consider the following accounts: a. Accounts Payable b. Cash c. Common Stock d. Accounts Receivable e. Rent Expense f. Service Revenue g. Office Supplies h. Dividends i. Land j. Salaries Expense Identify each account as Asset, Liability, or Equity

Elaine鈥檚 Inflatables earns service revenue by providing party planning services and inflatable playscapes. Elaine鈥檚 Inflatables is organized as a corporation. During the past month, Elaine鈥檚 Inflatables had the following transactions:

a. Received contributions of \(10,000 in exchange for common stock.

b. Purchased equipment for \)5,000 on account

c. Paid \(400 for office supplies.

d. Earned and received \)2,500 cash for service revenue.

e. Paid \(400 for wages to employees.

f. Cash dividends of \)1,000 were paid to stockholders.

g. Earned \(1,000 for services provided. Customer has not yet paid.

h. Paid \)1,000 for rent.

i. Received a bill for $250 for the monthly utilities. The bill has not yet been paid.

Indicate the effects of the business transactions on the accounting equation for

Elaine鈥檚 Inflatables. Transaction (a) is answered as a guide.

a. Increase asset (Cash); Increase equity (Common Stock)

Match the accounting terminology to the definitions. 1. Certified management accountants a. information system that measures business activities, processes that information into reports, and communicates the results to decision makers 2. Accounting b. professional accountants who serve the general public 3. Managerial accounting c. person or business to whom a business owes money 4. Certified public accountants d. field of accounting that focuses on providing information for internal decision makers 5. Financial accounting e. professionals who work for a single company 6. Creditor f. field of accounting that focuses on providing information for external decision makers
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