Financial Accounting, 9th Edition

2 The Recording Process

Feature Story Accidents Happen

How organized are you financially? Take a short quiz. Answer yes or no to each question:

• Does your wallet contain so many cash machine receipts that you've been declared a walking fire hazard?
• Do you wait until your debit card is denied before checking the status of your funds?
• Was Aaron Rodgers (the quarterback for the Green Bay Packers) playing high school football the last time you verified the accuracy of your bank account?

If you think it is hard to keep track of the many transactions that make up your life, imagine how difficult it is for a big corporation to do so. Not only that, but now consider how important it is for a large company to have good accounting records, especially if it has control of your life savings. MF Global Holdings Ltd is such a company. As a big investment broker, it held billions of dollars of investments for clients. If you had your life savings invested at MF Global, you might be slightly displeased if you heard this from one of its representatives: “You know, I kind of remember an account for someone with a name like yours—now what did we do with that?”

Unfortunately, that is almost exactly what happened to MF Global's clients shortly before it filed for bankruptcy. During the days immediately ...