Question

As the bookkeeper of a new start-up company, you are responsible for keeping the chart of accounts up to date. At the end of each year, you analyze the accounts to verify that each account should be active for accumulation of costs, revenues, and expenses.

In July, the accounts payable (A/P) clerk asked you to open an account named New Expenses. You know that an account name should be specific and well defined, and you're afraid the A/P clerk might charge some expenses to the account that are inappropriate.

Why do you think the A/P clerk needs the New Expenses account? Who needs to know this information, and what action should you consider?

Answer 1

You should explain to the clerk that the account title is not appropriate and he needs to be specific with the name. If he does not understand ask him to show you the source document for the expense such as invoice or check so that you can decide on the proper name of the account. There is no need to become suspicious just because the clerk does not understand enough about accounting. If he still insists on the account name and does not want to cooperate, then you should go to his superior to discuss the issue. You can't expect an A/P clerk to understand as much accounting as you do.

Also,

It is the duty of the bookkeeper to keep the chart of the accounts up to date and must verify that all the expenses, revenues which have been occurred the period have been entered regularly. As the accounts payable clerk is insisting you for opening a new account of expense, you must told him to show the source of the document or invoice so that you can open the account with the proper heading because the name suggested for opening the account is not appropriate and the A/P clerk did not have enough knowledge about accounting. Secondly, it may be possible that A/P clerk is doing some wrong business and he doesn't want anyone to know about his business and by opening a new account nobody knows what the account is really for. If the A/P clerk didn't provide the source document for the expense and insists on opening the new account, then you must report this matter to the senior of the A/P and the owner of the business.