[Fwd: Re: Accounting 101 Question: GnuCash Balance Sheets]

[Eric Morey]

-------- Forwarded Message --------
> From: Eric Morey <eric at glodime.com>
> To: tonyn999 at gmail.com
> Subject: Re: Accounting 101 Question: GnuCash Balance Sheets
> Date: Tue, 06 Sep 2011 12:06:19 -0400
> 
> On Sat, 2011-08-27 at 01:16 -0700, Anthony Nelson wrote:
> > From the balance sheet assets report there are three numeric columns:
> > Column1 includes Current Assets and Fixed Assets (all are positive
> > numbers
> > except for accumulated depreciation)
> > Column 2 includes Accounts Receivable (a positive number)
> > Column 3 includes Imbalance-USD ($23.11 in my case), a zero value for
> > Orphan-USD, and Total Assets.
> > 
> > Some questions:
> > 1) Why are there three columns and what do they represent (the first
> > two
> > don't seem to be credit/debit)?
> > 
> 
> I can't speak to the specific motivation of the GnuCash developers.
> However, accountants generally use columns in reports to make important
> or related information stand out.  In this case the third column has
> very important information "Imbalance-USD" indicating a mistake in your
> bookkeeping. It is generally arbitrary but intended to be helpful. 
> 
> 
> > 2) Why are accounts receivables alone in the second column?
> > 
> I'm not sure.
> 
> 
> > 3) Why is the negative accumulated depreciation recorded under assets?
> >  Seems like a negative assets would really be a liability?  I read
> > from some website that Accumulated Depreciation is a "Contra Account".
> > What is the contra account to Accumulated Depreciation?  Is it on the
> > balance sheet or elsewhere?
> 
> Contra accounts, or in the case of Accumulated Depreciation - a contra
> asset, are grouped with their associated account to preserve
> information. For instance, an asset purchased for 100 could be
> depreciated by 40 leaving a balance of 60. Using a strict write down
> approach the asset could be recorded at a value of 60 after the 40 of
> depreciation was expensed. Using the contra account approach the asset
> is recorded at 100 with Accumulated Depreciation of 40 and a net value
> of 60. More information is preserved in the contra account approach and
> is therefore useful for forecasting and tax preparation and tax
> planing. 
> 
> I hope this has helped clear things up for you.