The following is an excerpt from a telephone conversation between Ben Simpson, p
ID: 2490316 • Letter: T
Question
The following is an excerpt from a telephone conversation between Ben Simpson, presi- dent of Main Street Co., and Tami Lundgren, owner of Reliable Employment Co.
Ben: Tami, you’re going to have to do a better job of finding me a new computer programmer. That last guy was great at programming, but he didn’t have any common sense.
Tami: What do you mean? The guy had a master’s degree with straight A’s.
Ben: Yes, well, last month he developed a new financial reporting system. He said we could do away with manually preparing an end-of-period spreadsheet (work sheet) and financial statements. The computer would automatically generate our financial statements with “a push of a button.”
Tami: So what’s the big deal? Sounds to me like it would save you time and effort. Ben: Right! The balance sheet showed a minus for supplies!
Tami: Minus supplies? How can that be?
Ben: That’s what I asked.
Tami: So, what did he say?
Ben: Well, after he checked the program, he said that it must be right. The minuses were greater than the pluses. . . . Tami: Didn’t he know that Supplies can’t have a credit balance—it must have a debit balance?
Ben: He asked me what a debit and credit were.
Tami: I see your point.
1. Comment on the (a) the desirability of computerizing Main Street Co.'s financial reporting system, (b) the elimination of the end-of-period spreadsheet in a computerized accounting system, and (c) the computer programmer's lack of accounting knowledge.
2. Explain to the programmer why Supplies could not have a credit balance.
Explanation / Answer
1) a) Computerizing main street Co's financial reporting system The nebenfits of computerizing is as follows 1) Accuracy : If the system is well made , the data available from the software will be accurate and will be free from errors 2) Saves time : A computerised environment always saves time It is faster than making reports or entering data manually 3) Flexibility : The data can be used in many more ways than the data if available manually 4) Many more reports can be made avaialble in a computerised environment b) If the financial reporting system is computerised , the end of period spreadsheet will be eliminated , as the benefit of a computerised environment is least amount of manual intervention, if the computerised reporting sysytem is accurately designed , the reports would be available immediately and no excel spread sheet would be required c) The progemmer who is entrusted with the designing of the software needs to have basic accounting knowledge else the software can have errors , which will give absurd results and will require more enrgy and time of the management to understand and correct them. Hence a good programmer with reasonable knowledge of accounting should be entrusted with this task otherwise the entire reports will be wrong and incorrect 2) Supplies is an inventory avaialble with the company and is an asset All assets have a debit balance , as you cannot sell or expense out something more than what you have or own eg if I do have 100 units of supplies , how can I use more than 100 units of supplies, maximum that I can use is 100 or less than 100 based on this logic , supplies will always have a debit balance and can never have a negative balance
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