Hanna Na is in the process of setting up the chart of accounts for a company that is converting their manual system to a computerized accounting system. Below is a proposed chart of accounts:
T. Forgere, Capital ................................................. 30001
Advertising Expense ............................................. 51001
Building .................................................................. 17001
Accounts Payable .................................................. 21001
Sales Revenue ........................................................ 41001
Miscellaneous Expenses ....................................... 59001
Cash ......................................................................... 11001
T. Forgere, Withdrawals ....................................... 31002
Land ........................................................................ 18001
Notes Payable ........................................................ 25001
Accounts Receivable ............................................. 12001
Salaries Expense .................................................... 54001
Net Income ............................................................. 60000
Required
1. Can you see a problem with the numbering system that Hanna has decided on?
2. How would this affect the financial reports?