The following is an excerpt from a telephone conversation between Jan Young, president of Cupboard Supplies Co., and Steve Nisbet, owner of Nisbet Employment Co.
Jan: Steve, 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.
Steve: What do you mean? The guy had a master's degree with straight A's.
Jan: 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."
Steve: So what's the big deal? Sounds to me like it would save you time and effort.
Jan: Right! The balance sheet showed a minus for supplies!
Steve: Minus supplies? How can that be?
Jan: That's what I asked.
Steve: So, what did he say?
Jan: Well, after he checked the program, he said that it must be right. The minuses were greater than the pluses. . . .
Steve: Didn't he know that Supplies can't have a credit balance-it must have a debit balance?
Jan: He asked me what a debit and credit were.
Steve: I see your point.
1. Comment on
(a) The desirability of computerizing Cupboard Supplies Co.'s financial reporting system,
(b) The elimination of the end-of-period spreadsheet (work sheet) in a computerized accounting system
(c) The computer programmer's lack of accounting knowledge.
2. Explain to the programmer why Supplies could not have a credit balance.