(L.O. 4) The two organizations who are primarily responsible for establishing generally accepted accounting principles are:
Explanation: The Financial Accounting Standards Board (FASB) is a private organization that establishes broad reporting standards of general applicability as well as specific accounting rules. The Securities and Exchange Commission (SEC) is a governmental agency that requires companies filing financial reports with it to follow generally accepted accounting principles. In situations where no principles exist, the SEC often mandates that certain guidelines be used. In general, the FASB and the SEC work hand in hand to assure that timely and useful accounting principles are developed. (Solution = c.)
(L.O. 5) Which accounting assumption or principle dictates that a business owner's personal expenses should not be recorded on the books of the business?
Approach and Explanation: Briefly explain each answer selection. Compare your explanations with the question. The economic entity assumption requires that the activities of the entity be kept separate and distinct from (1) the activities of its owners, and (2) all other economic entities. The monetary unit assumption requires that only ...