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    Ethical dilemma in Accounting

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    The net income of Simon and Hobbs, a department store, decreased sharply during 2000. Carol Simon, owner of the store, anticipates the need for a bank loan in 2001. Late in 2000, Simon instructs the store's accountant to record a $10,000 sale of furniture to the Simon family, even though the goods will not be shipped from the manufacturer until January 2001. Simon also tells the accountant not to make the following December 31, 2000 adjusting entries:
    ? Salaries owed to employees: $900
    ? Prepaid insurance that has expired: $400
    Why is Simon taking this action? Is her action ethical? Give your reason, identifying the parties helped and the parties harmed by Simon's action.

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    Solution Preview

    1. Any kind of manipulations and window dressing with the financial statements is ethically incorrect. One should present the correct picture to the people around whether they are creditors, shareholders, employees or general citizens. This is a question of ethical integrity for Simon.

    2. The two items will change are Sales and accounts receivables. The recording of sales will overstate the sales. BY ...

    Solution Summary

    This solutions analyses the problem of ethical dilemma present in the question and explains what is best course of action in such situations. The discussion would provide lead to understand the principles of ethics in accounting.