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Pages:
2 pages/≈550 words
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Style:
APA
Subject:
Accounting, Finance, SPSS
Type:
Essay
Language:
English (U.S.)
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Date:
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Topic:

Ethical Considerations in Accounting: Linbarger Company

Essay Instructions:

Assignment: Ethics in Accounting
Due Week 9 and worth 120 points
Effective financial reporting depends on sound ethical behavior. Financial scandals in accounting and the businesses world have resulted in legislation to ensure adequate disclosures and honesty and integrity in financial reporting. A sound economy is contingent on truthful and reliable financial reporting.
Instructions:
Read the following scenario.
Answer the questions that follow. Your answers should result in a 2-3 page submission.
Reference back to your text book for guidance on how to think through the scenario.
Scenario:
Imagine you are the assistant controller in charge of general ledger accounting at Linbarger Company. Your company has a large loan from an insurance company. The loan agreement requires that the company’s cash account balance be maintained at $200,000 or more, as reported monthly. At June 30, the cash balance is $80,000. You give this update to Lisa Infante, the financial vice president. Lisa is nervous and instructs you to keep the cash receipts book open for one additional day for purposes of the June 30 report to the insurance company. Lisa says, “If we don’t get that cash balance over $200,000, we’ll default on our loan agreement. They could close us down, put us all out of our jobs!” Lisa continues, “I talked to Oconto Distributors (one of Linbarger’s largest customers) this morning. They said they sent us a check for $150,000 yesterday. We should receive it tomorrow. If we include just that one check in our cash balance, we’ll be in the clear. It’s in the mail!”
Questions
What is the accounting problem that the Linbarger Company faces?
What are the ethical considerations in this case? Provide rationale for why these are ethical considerations.
What are the negative impacts that can happen if you do not follow Lisa Infante’s instructions to wait one more day to post the balance?
Who will be negatively impacted if you do comply? Provide a rationale for why these individuals will be impacted.
What is one alternative that you could pursue in this scenario? Support your recommendations with information you learned in this class.

Essay Sample Content Preview:

Ethics in Accounting
Author Name
University Name
What is the accounting problem that the Linbarger Company faces?
I have observed that the Linbarger Company must maintain a cash balance of $200,000 by the end of this month, but it has only $80,000. Lisa Infante, the company’s financial vice president, told that one a customer had sent a check back which might be received by tomorrow. As per its rules and regulations, the Linbarger Company must pass the journal entries for the cash in transit balance. Currently, the company is facing serious accounting problems. It would have to plan things properly and coordinate between payments and receipts to resolve all issues as soon as possible. Miss Lisa Infante should consider short-term cash funding resources to honor the agreements.
What are the ethical considerations in this case? Provide rationale for why these are ethical considerations.
As per the periodicity concepts of accounting, there has to be uniformity when it comes to closing the book of accounts. Miss Lisa should not include the receipts of 1st July and 2nd July in the total balance of 30th June because this can cause cumulative errors. The company management should understand that such errors are often considered fraud and can lead to severe punishments. Thus, there is a strong need to respect the work ethic.
What are the negative impacts that can happen if you do not follow Lisa Infante’s instructions to wait one more day to post the balance?
I don’t think we have enough time to wait for another day to post the balance because the negative effects are very much clea...
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