Managing Business Through Creative Accounting Techniques
Essay Preview: Managing Business Through Creative Accounting Techniques
Report this essay
Introduction
Accounting as a science can say about it that is all registration operations based on rules and special rules, the movement of funds and materials in an institution.
A proverb says, however, that rules are made to be broken. Thus, we can talk about creative accounting accounting concept accounting information practices, often at the limit of legality, practiced by some companies, which, taking advantage of the limits of normalization, seeks to beautify the image of the financial situation and the economic and financial performance.
Accountant, the main character of the story is like a tightrope, balancing between success success or failure of shame, of course, a much more serious: we are talking about maximizing profiturior company, on the one hand, and criminal entry under the other.
Despite the fact that the law is intended to cover an area as large in terms of accounting issues, there will always be issues that will allow some legal innovation, economic and financial. It can be here, the temptation forbidden fruit “in terms of professional accountants. Motivation for them may appear just on this fact: detecting irregular situations and, particularly, the passing of the law on their side, taking advantage of its ambiguities.
If at first you can sketch a picture “fraudulent”, which honors science research is not quite so. Moreover, the primary contribution of researchers – in this case accountants – is to ensure accumulation of knowledge. Thus, connoisseurs participate in the development of accounting sciences, a knowledge base capable of conducting itself in the development of accounting.
Within the scope sciences, we liken creative accounting, engineering accounting designation. Use the term “accounting engineering” an argument by the fact that it can be equated with the work of creation, design, research, leading to “technological process” by professional accountants, which shows “positive image” desired company.
The question is whether accounting fraud and engineering are two terms synonymous. The answer is absolutely not. Fraud is the act of bad faith that violate the law, is a negative, while accounting engineering law but not its spirit. Although various approaches presented have a common denominator, one that is legal and accounting engineering aims to create a distorted image of the company, presenting a more prosperous, more attractive, thereby misleading investors.
Creative accounting should not be seen as a negative factor in the economic equation. Accounting innovation is needed to keep pace with economic, legal and social. Its origin is virtuous creative accounting: it offers accounting resources to enable it to keep pace with the growing development of markets and the proliferation of financial products. The problem arises from the fact that begins to rapidly develop instinctive perversity business.
Perception of reality by human nature is essentially subjective. We illustrate this with an example: if three students are in charge of describing the same landscape, their wording will be different but incorrect, given substance. Of course, assets, results and financial position of a company is a unique reality. Everything starts but the image these objectives of accounting that may be different but unfaithful.
Also be studied accounting issues rooted in economic reality, in contrast with accounting issues based on the legal nature of the instrument. In order to better financial environment, accounting is required to adjust the rules. Such fundamental accounting principles must remain intangible yet to be interpretable in terms of their applicability.
Research Methods
In order to study the phenomenon of creative accounting and accounting engineering exposure, we used the research methods of document analysis, secondary data analysis or consultation literature. To illustrate a clearer picture regarding creative accounting techniques used have been some projections that help to understand certain aspects.
Results
Business performance and its handling techniques are accounting treatment facility, especially international accounting rules. Depending on the interests of professional accountants there are several options “for this is sometimes accounting choices or discretion characteristic of human nature subjective.
DOLE any self-respecting manager is the company profit maximization, but most often financial results are rather comform with objectives targeted than reality. Thus, depending on the context, can the accounting policies aim: reducing losses published taxable benefit decrease, increase or decrease the current results, the increase or decrease in benefit distribution, temporary tuning accounting results to reduce the perceived risk of financial environment.
Next we try through some examples to illustrate methods that lead to these objectives.
Adult Profit and Loss Account
Profit and loss account summarizes a companys success or performance. But a reluctance arises when it comes to credibility to be attached to this document. This can easily modify this document by applying different accounting methods whose purpose or improve current result and net result or altering the structure without affecting the net result.
a depreciation policy
Depreciation policy implemented by the entity may influence the financial result. This influence is exerted through the amortization period, or method of amortization. Example of amortization period:
Company X purchases a fixed asset worth £ 24,000 which choose a depreciation period of three years, profit and loss account has the following image:
Company X Year 1 Year 2 Year 3 Total
Turnover
– Consumption of others
– Staff costs
– Depreciation 200,000
120000
60000
8000 200000
120000
60000
8000 200000
120000
60000
8000 600000
360000
180000
24000
From operations 12000 12000 12000 36000
From