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This posting addresses basic accounting principles.

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First, compare two financial statements: Balance Sheet and Income Statement. Second, explain two terms: double entry accounting and contra-asset account.

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Solution Summary

The solution provides a detailed discussion on the balance sheet, the income statement, double entry accounting, and contra-asset accounts.

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The balance sheet shows the company's assets (on the left side), and liabilities and owner equity (on the right side). Both the left and right sides balance (are equal to) each other. The assets include items such as equipment, property, land, cash accounts, accounts receivables, prepaid accounts. Liabilities include loans, notes, credit card liabilities, accounts payable. Owner's equity includes owner draws (cash used for personal reasons from the business), paid-in capital, and retained earnings. ...

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