Ethics In Accounting Assignment

Ethics In Accounting Assignment Words: 427

It is however understandable that there will be no net effect on the cash flows, this is so because the 580000 will be recorded as cash receivables outflow in long term. The rise in the accounts receivable will instead be reported as a rise in the long term receivables under the section marked as investment activities of the statement of cash flow. Though the changed net cash flow from the companys operation can make Moss look better, there is no general change to the net cash flow (Loeb, 2008).

Reclassification of the receivable can only be ethical if the receivables in the actual sense are projected to be received o sooner than the first twelve month of the year. Reclassification will only be considered unethical if the receivables are scheduled to be recovered sooner than after the twelve months and to that case if Moss still records them as long term receivables. Moss can report the short term part of the receivables as current asset as well as the long term part as noncurrent asset if not all the receivables are long term (Loeb, 2008).

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Such reclassification can only be ethical if the company creates an agreement with the overseas debtor with a new collection agreement where the $80000 is seen as collected. It will only e unethical if the company is only reclassifying bad debts to long term debts, it is professionally unacceptable. In the current business set up, banks are quite smart and will always call for the detailed aged accounts of the business and that will include the accounts receivables (Duska & Duska, 2003).

Uncollectable accounts are considered to involve those that have lasted more than 1 90 days and therefore are not considered by the banks. Also in most cases most banks make use of the current ratio, which is determined by current assets being divided by current liabilities. Therefore by reclassification f $80000 to long term assets the company will not be helping themselves in any way. There are GAAPs created as it regards to the value of accounts receivable, and there are unethical behaviors that contravenes the GAAP on disclosure.

For instance Moss deliberately overstated the asset value of the accounts receivables in order to secure the loan. The company believed that the debt was not going to be recovered but still went ahead to represent it otherwise to distort the actual value of the accounts receivable (Mintz, 2007). The company in acting this way distorted the provision of the accounts eceivable in the balance sheet.

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Ethics In Accounting Assignment. (2019, May 11). Retrieved May 24, 2019, from https://anyassignment.com/philosophy/ethics-in-accounting-assignment-30012/