Winnie Lu is in the process of setting up the chart of accounts for a company that is converting its manual system to a computerized accounting system. Below is a proposed chart of accounts:
T. Pioneer, Capital ................................................. 30001
Advertising Expense ............................................. 51001
Building .................................................................. 17001
Accounts Payable.................................................. 21001
Sales Revenue........................................................ 41001
Miscellaneous Expenses ....................................... 59001
Cash ......................................................................... 11001
T. Pioneer, Withdrawals ....................................... 21002
Land ........................................................................ 18001
Notes Payable........................................................ 25001
Accounts Receivable ............................................. 12001
Salaries Expense .................................................... 54001
Required
1. Can you see a problem with the numbering system that has be decided upon by Winnie? How would this affect the financial reports?
2. What could happen during the closing process?