Introduction, Review of Accounting Process and Financial Statements
“Unlike most other modern professions, accounting has a history that is usually discussed in terms of one seminal event-the invention and dissemination of the double entry bookkeeping processes.” (http://www.acaus.org) There are many that would argue that accounting developed for the needs of the time due to changes in the environment and society. Then there are others that say the science of accounting is responsible for the evolution of commerce since it is due to precise accounting methods that modern businesses were able to grow and flourish. Accountants use generally accepted accounting principles (GAAP) to guide them in recording and reporting financial information. GAAP comprises a broad set of principles that have been developed by the accounting profession and the Securities and Exchange Commission (SEC). Two laws, the Securities Act of 1933 and the Securities Exchange Act of 1934, give the SEC authority to establish reporting and disclosure requirements. However, the SEC usually operates in an oversight capacity, allowing the FASB and the Governmental Accounting Standards Board (GASB) to establish these requirements. The GASB develops accounting standards for state and local governments. The current set of principles that accountants use rests upon some underlying assumptions. In addition to these concepts, there are other, more technical standards accountants must follow when preparing financial statements.
A contra-asset account is an account used to accumulate information separate from, but related to, a specific account. For example, rather than crediting a capital asset directly for accumulated amortization, a contra-asset account is used, Accumulated Amortization, to do so. Contra-asset accounts have an opposite normal balance to the account it relates to. You can have a