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explain to the programmer why supplies could not have a credit balance 638622

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, and (c) 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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