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Horngren'S Financial And Managerial Accounting
Found in: Page 32

Short Answer

Explain the purpose of Generally Accepted Accounting Principles (GAAP), including the organization currently responsible for the creation and governance of these standards

GAAP is created and governed by the FASB. The purpose of GAAP is to assist in financial reporting and create acceptable accounting practices.

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Step by Step Solution

Explanation of FASB

Financial Accounting Standards Board (FASB) is the organization in the U.S. responsible for creating and monitoring the Generally Accepted Accounting Principles (GAAP).

Explanation of GAAP

GAAP is the leading book for the rule of accounting in the U.S. It exhibits the conceptual framework of the objectives, characteristics, and elements of the financial statements issued by businesses. It provides a detailed process or rule for presenting the information in the financial report, which is globally accepted.

Most popular questions for Business-studies Textbooks

Canyon Canoe Company is a service-based company that rents canoes for use on local lakes and rivers. Amber and Zack Wilson graduated from college about 10 years ago. They both worked for one of the “Big Four” accounting firms and became CPAs. Because they both love the outdoors, they decided to begin a new business that will combine their love of outdoor activities with their business knowledge. Amber and Zack decide that they will create a new corporation, Canyon Canoe Company, or CCC for short. The business began operations on November 1, 2018. Nov. 1 Received $16,000 cash to begin the company and issued common stock to Amber and Zack. 2 Signed a lease for a building and paid $1,200 for the first month’s rent. 3 Purchased canoes for $4,800 on account. 4 Purchased office supplies on account, $750. 7 Earned $1,400 cash for rental of canoes. 13 Paid $1,500 cash for wages. 15 Paid $50 dividends to stockholders. 16 Received a bill for $150 for utilities. (Use separate payable account.) 20 Received a bill for $175 for cell phone expenses. (Use separate payable account.) 22 Rented canoes to Early Start Daycare on account, $3,000. 26 Paid $1,000 on account related to the November 3, 2018, purchase. 28 Received $750 from Early Start Daycare for canoe rental on November 22, 2018. 30 Paid $100 dividends to stockholders. Requirements 1. Analyze the effects of Canyon Canoe Company’s transactions on the accounting equation. Use the format of Exhibit 1-6, and include these headings: Cash; Accounts Receivable; Office Supplies; Canoes; Accounts Payable; Utilities Payable; Telephone Payable; Common Stock; Dividends; Canoe Rental Revenue; Rent Expense; Utilities Expense; Wages Expense; and Telephone Expense.

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