TyroCity

Discussion on: Accounting and Ethical Issues involved in the following case

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In the Accrual Basis of Accounting, the revenue is recorded when earned and expenses are recorded when incurred, regardless of when cash is exchanged. All revenues of the association are reported when earned, not when received. For Example, Members’ Assessments are reported as revenues on the association’s Income Statement (Statement of Revenues and Expenses) when they are charged to the members (i.e., earned by the association, usually on the first day of the month). At the same time, a corresponding asset titled "Assessments Receivable” is reported on the face of the Balance Sheet. As payments are received from the members, they increase the association’s Cash balance while either reducing Assessments Receivable (if the payment is received after the assessment has been charged) or increasing Prepaid Assessments (if the payment is received before the assessment is actually earned) (Mahadi & Khalid, 2017). But all expenses of the association are reported when incurred, not when paid. For Example, The costs of various services that are provided to the association (e.g., bookkeeping, insurance, landscaping, management, utilities, etc.) are reported as expenses on the Income Statement when these services have actually been provided. At the same time, a corresponding liability titled "Accounts Payable” is reported on the face of the Balance Sheet. As these items are paid, the association’s Cash balance and Accounts Payable are reduced (Mahadi & Khalid, 2017).

In my point of view when my manager asked me to keep the record of rent expense for only eight months is logically wrong because in accrual account the revenue is recorded when earned and expenses are recorded when incurred. So that I could not do as per him because it is against of accounting principal and standard. If we keep the record as per manager then we are able to reduce the expenses of this annual years then profit is maximized after that the amount of employee bonus is definitely increased. So that as a professional accountant responsibility is not exclusively to satisfy the needs of an individual client or employer and maximize the profit in a wrong way. But a professional accountant should observe and comply with the ethical requirements of this Code. According to (Meymandi & Rajabdoory, 2015) this Code is in three parts, first is establishes the fundamental principles of professional ethics for professional accountants and provides a conceptual framework for applying those principles, second is the conceptual framework is to be applied in specific situations and the last one applies to professional accountants in business. As a professional accountant, I shall comply with the following fundamental ethics and guidance. These are integrity, Objectivity, Professional Competence, Confidentiality, Professional Behavior and accountability (Jaijairam, 2017). My major duty is not keeping the record only I should follow this as well.

If he/she force me to do this on his/her way then I would inform with stakeholder or senior line manager. For example, if I am working in a Commercial bank as an accountant then my branch manager ask me to record this on this way then I would inform those matter with the senior manager or general manager of our Bank.

References

Jaijairam, P. (2017). Ethics in Accounting. Research Gate, 48-52.

Mahadi, R., & Khalid, S. (2017). Accrual Accounting in Public Sectors. Asian Journal of Finance & Accounting, 16-21.

Meymandi, A., & Rajabdoory, H. (2015). Ethics in Accounting Job. International Journal of Management, Accounting, and Economics Vol. 2, No. 2, 136-141.