Question

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

The correct options are matched as follows:

Step-by-step solution

Explanation on Cost Principle

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

Explanation on GAAP

GAAP stands for “Generally Accepted Accounting Principles” which provides the guidelines for accounting information. It is the main book of accounting rules in the U.S.

Explanation on faithful representation

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

Explanation on SEC

SEC stands for “Securities and Exchange Commissions”. It is the agency formulated by the U.S. government, which oversees the financial markets of the U.S.

Explanation on FASB

FASB stands for “Financial Accounting Standards Board”. It is the organization which is privately funded and responsible for creation and governance of the standards of accounting.

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.

Explanation on economic entity assumption

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

Explanation on going concern assumption

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

Explanation on IASB

IASB stands for “International Accounting Standards Board”. It is responsible for publishing IFRS.