Standard setting bodies Financial Accounting Standards Board FASB Securities

Standard setting bodies financial accounting

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Standard-setting bodies: Financial Accounting Standards Board (FASB) Securities and Exchange Commission (SEC) International Accounting Standards Board (IASB) Generally Accepted Accounting Principles LO 2
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1-14 Measurement Principles HISTORICAL COST PRINCIPLE (or cost principle) dictates that companies record assets at their cost. FAIR VALUE PRINCIPLE states that assets and liabilities should be reported at fair value (the price received to sell an asset or settle a liability). Selection of which principle to follow generally relates to trade-offs between relevance and faithful representation . LO 2
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1-15 MONETARY UNIT ASSUMPTION requires that companies include in the accounting records only transaction data that can be expressed in terms of money. ECONOMIC ENTITY ASSUMPTION requires that activities of the entity be kept separate and distinct from the activities of its owner and all other economic entities. Proprietorship Partnership Corporation Forms of Business Ownership Assumptions LO 2
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1-16 Proprietorship Partnership Corporation Owned by two or more persons Often retail and service-type businesses Generally unlimited personal liability Partnership agreement Ownership divided into shares of stock Separate legal entity organized under state corporation law Limited liability Owned by one person Owner is often manager/operator Owner receives any profits, suffers any losses, and is personally liable for all debts Forms of Business Ownership LO 2
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1-17 Question Combining the activities of Kellogg and General Mills would violate the a. cost principle. b. economic entity assumption. c. monetary unit assumption. d. ethics principle. LO 2 Assumptions
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1-18 A business organized as a separate legal entity under state law having ownership divided into shares of stock is a a. proprietorship. b. partnership. c. corporation. d. sole proprietorship. Question LO 2 Assumptions
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1-19 Indicate whether each of the following statements presented below is true or false . 1. Congress passed the Sarbanes-Oxley Act to reduce unethical behavior and decrease the likelihood of future corporate scandals. 2. The primary accounting standard-setting body in the United States is the Financial Accounting Standards Board (FASB). 3. The historical cost principle dictates that companies record assets at their cost. In later periods, however, the fair value of the asset must be used if fair value is higher than its cost. True False True LO 2 DO IT! 2 Building Blocks of Accounting
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1-20 4. A business owner’s personal expenses must be separated from expenses of the business to comply with accounting’s economic entity assumption. True LO 2 Indicate whether each of the following statements presented below is true or false .
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  • Winter '17
  • Dr. Mahwish Anjum
  • Balance Sheet, Generally Accepted Accounting Principles, Lo, owner, Softbyte

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