Window Dressing SATYAJEET

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Window Dressing : 

Creative Accounting BY:SATYAJEET CHAUHAN Window Dressing

Creative Accounting : 

Creative Accounting A form of accounting which even while complying with all rules and regulations of accounting, nevertheless gives a biased information about company’s performance Creative accounting involves using flexibility within accounting to manage the measurement and presentation of the account to serve the interest of the people who prepare the account rather than for whom the accounts is prepared for.

Cont.. : 

Cont.. Some methods are contrary to law But accounting standards permits flexibility of interpretation This coupled with managerial interest results in window dressing If the intention is to deceive the stakeholders then unethical

Methods of Window Dressing : 

Methods of Window Dressing

Short term Borrowing : 

Short term Borrowing Short term borrowing is done just the date on which the balance sheet is drawn up. This gives an impression that the ability to pay the short term debts is enhanced But increases an additional liability

Chasing Debtors : 

Chasing Debtors Special effort to chase debtors before the balance sheet is drawn up This might involve discounts for prompt payment and extra expense. Conversion of debtors into cash will improve the balance sheet and cash position of the organization There is a sudden improve in the liquidity but at the expense of sales revenue

Bringing Forward Sales : 

Bringing Forward Sales Sales show up in the P&L account when the order is received- not when the cash is received. If the customers are made to place the orders earlier than planned. There will an increase in the sales revenue figure in the P&L account This can bring the next years sales to current year The sales cannot be included in next year’s figure The problem continues to exsist.

Including Intangible Assets : 

Including Intangible Assets Intangible assets: Brand name, Good will Normally only included if purchased They are subject to depreciation-amortization But if they are not depreciated the firm maintain the value of its assets thus giving a misleading view of the asset value of the firm.

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