Company A's chart of accounts contains the following: Cash (101), Accounts receivable (102), inventory (103), equipment (201), accounts payable (301). Company B's chart of accounts shows: Wages payable (112), Taxes payable (113), Retained earnings (114). Which of the following is true?

Question

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Company A uses block coding, as accounts are grouped by categories. The first digit represents the category of the account (1 for assets, 2 for property, plant, and equipment, and 3 for liabilities). Company B uses sequential coding, as accounts are numbered consecutively without grouping by categories.

Company A's Chart of Accounts Contains the Following: Cash (101)