Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615



Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem

Financial statements

The following is an excerpt from a telephone conversation between Ben Simpson, president 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 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 (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.


To determine

Financial statement

A financial statement is the complete record of financial transactions that take place in a company at a particular point of time. It provides important financial information like assets, liabilities, revenues and expenses of the company to its internal and external users. It helps them to know the exact financial position of the company. There are four basic financial statements; they are:

  • Balance Sheet
  • Income statement
  • Statement of owners’ equity
  • Statement of cash flows


A spreadsheet is a worksheet. It is used while preparing a financial statement. It is a type of form having multiple columns and it is used in the adjustment process. The use of a worksheet is optional for any organization. A worksheet can neither be considered as a journal nor a part of the general ledger.

To Comment on: The desirability of computerizing Company MS’s financial reporting system.


  • Computerizing the financial reporting system by Company MS is desirable as it decreases the costs of the com...


To determine

To explain: To the programmer the reason behind the supplies could not have a credit balance.

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