Case of business ethics
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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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This discusses a case of business ethics
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Simon is taking this action to show artificially high profits.
This action is unethical because accounting is the means by which information about an enterprise is communicated and, thus, is sometimes called the language of business. Costs, prices, sales volume, profits, and return on investment are all accounting measurements. Accountants summarize this information in a balance sheet, income statement, and statement of cash flows. The statement of cash ...
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