3.6 Ethical Issues in Accrual Accounting PDF
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This document examines ethical dilemmas in accrual accounting. It uses examples to highlight how dishonest reporting can mislead individuals concerning financial stability and result in unethical decisions. The document focuses on the importance of ethical considerations in business transactions and emphasizes the role of complete and accurate information in rational decision-making.
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3.6 Ethical issues in accrual accounting LO 3.6 Describe ethical challenges in accrual accounting Business transactions or events can pose ethical challenges. Accountants must be honest in their work. Complete and accurate information can help people make wise decisions. Think about the following ex...
3.6 Ethical issues in accrual accounting LO 3.6 Describe ethical challenges in accrual accounting Business transactions or events can pose ethical challenges. Accountants must be honest in their work. Complete and accurate information can help people make wise decisions. Think about the following example. Smart Touch has done well as a business and wishes to open another office. Assume that the business needs to borrow $30 000. Suppose that the e-learning agency understated expenses in order to inflate profit on the income statement. A banker could be misled into lending the business money. Then, if the business couldn’t repay the loan, the bank would lose—because the banker relied on incorrect accounting information. Accrual accounting provides opportunities for unethical behaviour. For example, a dishonest businessperson could omit depreciation expense at the end of the year. Failing to record depreciation would overstate profit OT DISTR as calculated by mandated accrual principles, and disclose a more favourable picture of the business’s N financial position than actually existed. O I B D UT - © P E A RS O N E ENT.... STUD FO 7@ R HE 58 1 T PR 2 094 IVAT E USE OF
