Answer to Question #83401 in Accounting for Lolla priscillia

Question

Describe some of the problems that might arise from a failure to maintain and update an existing Chart of Accounts.

Answer 1

The purpose of the chart of accounts is to provide the recording and reporting about all financial transactions. If organization failure to maintain and update an existing Chart of Accounts, the consequences can be serious. First of all, the accounting system in the enterprise will not meet international and national accounting requirements; it will make more difficult the collaboration between the company and other organizations or government bodies. A lot of business and financial transactions in organization will be reflected incorrectly, which will lead to errors in tax accounting. This eventually may entail legal proceedings or penalties by government authorities.