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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

Polk Street Homes had the following cash transactions for the month ended July 31, 2018.

Cash receipts:

Collections from customers $ 25,000

Issued common stock 13,000

Cash payments:

Rent 500

Utilities 2,000

Salaries 1,500

Purchase of equipment 25,000

Payment of cash dividends 4,000

Cash balance, July 1, 2018 14,000

Cash balance, July 31, 2018 19,000

Prepare the statement of cash flows for Polk Street Homes for the month ended

July 31, 2018.

Briefly describe the two major fields of accounting

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)

Let鈥檚 examine a case using Greg鈥檚 Tunes and Sal鈥檚 Silly Songs. It is now the end of the first year of operations, and the stockholders want to know how well each business came out at the end of the year. Neither business kept complete accounting records, and no dividends were paid. The businesses throw together the data shown on the next page at year-end: \( 23,000 8,000 35,000 22,000 \) 10,000 6,000 44,000 9,000 Total Assets Common Stock Total Revenues Total Expenses Greg鈥檚 Tunes: Sal鈥檚 Silly Songs: Total Liabilities Common Stock Total Expenses Net Income To gain information for evaluating the businesses, the stockholders ask you several questions. For each answer, you must show your work to convince the stockholders that you know what you are talking about. Requirements 7. Which business looks better from a financial standpoint?

Centerpiece Arrangements has just completed operations for the year ended December 31, 2018. This is the third year of operations for the company. The following data have been assembled for the business: Insurance Expense \( 4,500 Salaries Expense \) 46,000 Service Revenue 70,000 Accounts Payable 17,600 Utilities Expense 1,400 Office Supplies 1,700 Rent Expense 16,000 Dividends 4,800 Common Stock 9,000 Accounts Receivable 8,000 Cash 7,200 Equipment 12,100 Retained Earnings, January 1, 2018 5,100

Preparing the statement of retained earnings

Prepare the statement of retained earnings of Centerpiece Arrangements for the year ended December 31, 2018
See all solutions

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