The following is an excerpt from a telephone conversation between Pedro Mendoza, president of Goliath Supplies Co., and Natalie Weich, owner of Flint Employment Co.: Pedro: Natalie, 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. Natalie: What do you mean? The guy had a master’s degree with straight A’s. Pedro: Yes, well, last month he developed a new financial reporting system. He said we could do away with manually preparing financial statements. The computer would automatically generate our financial statements with “a push of a button.” Natalie: So what’s the big deal? Sounds to me like it would save you time and effort. Pedro: Right! The balance sheet showed a minus for supplies! Natalie: Minus supplies? How can that be? Pedro: That’s what I asked. Natalie: So, what did he say? Pedro: Well, after he checked the program, he said that it must be right. The minuses were greater than the pluses... Natalie: Didn’t he know that supplies can’t have a credit balance—it must have a debit balance? Pedro: He asked me what a debit and credit were. Natalie: I see your point. 1. Comment on (a) the desirability of computerizing Goliath Supplies Co.’s financial reporting system and (b) the computer programmer’s lack of accounting knowledge. 2. Explain to the programmer why supplies could not have a credit balance.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The following is an excerpt from a telephone conversation between Pedro Mendoza, president of Goliath Supplies Co., and Natalie Weich, owner of Flint Employment Co.: Pedro: Natalie, 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. Natalie: What do you mean? The guy had a master’s degree with straight A’s. Pedro: Yes, well, last month he developed a new financial reporting system. He said we could do away with manually preparing financial statements. The computer would automatically generate our financial statements with “a push of a button.” Natalie: So what’s the big deal? Sounds to me like it would save you time and effort. Pedro: Right! The balance sheet showed a minus for supplies! Natalie: Minus supplies? How can that be? Pedro: That’s what I asked. Natalie: So, what did he say? Pedro: Well, after he checked the program, he said that it must be right. The minuses were greater than the pluses... Natalie: Didn’t he know that supplies can’t have a credit balance—it must have a debit balance? Pedro: He asked me what a debit and credit were. Natalie: I see your point.

1. Comment on (a) the desirability of computerizing Goliath Supplies Co.’s financial reporting system and (b) the computer programmer’s lack of accounting knowledge.

2. Explain to the programmer why supplies could not have a credit balance.

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