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I recently had a twitter question that I want to share. "Purchased and retired 20,000 preferred shares at $130 per share (assume par value of $100 and we issued the 20,000 shares at $150) -- what's the journal entry?"

When a company is formed, the accountant will produce the chart of accounts . In its most basic terms the chart of accounts is a listing of all a company's accounts with a corresponding number assigned to it. These numbers are not randomly assigned to the accounts of a business. In most cases the numbers are assigned in order that they appear on the financial statements beginning with the balance sheet and then moving to the income statement accounts. This is seemingly a basic and elementary task. However, most companies expect and plan to grow at some point in the future. Therefore, the accountant must ensure that the books posess the ablity to grow along with the company's growth (i.e. the ability to add additional accounts as needed).