The Ethics in Accounting

Essay Instructions:

Assignment: Ethics in Accounting
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 textbook for guidance on how to think through the scenario.
This course requires the use of new Strayer Writing Standards (SWS). The format is different from other Strayer University courses. Please take a moment to review the SWS documentation for details.
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 a 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 the information you learned in this class.

Essay Sample Content Preview:

Discussion
Student’s Name
Institution
Course
Date
DISCUSSION
1 What is the accounting problem that the Linbarger Company faces?
The company has to maintain a cash balance of $200,000 at the end of the month. The cash balance of the company is $80, 000 at the end of the month. Lisa states that the customers sent a check of $150, 000 yesterday and the company will receive it tomorrow, this means that the accounting terms of the company has a balance of $80,000 and the cash that is in transit is $150,000. From the discussion the major accounting problem the company is experiencing is with cash management. The company might have maintained a good coordination and proper planning between the payment and receipts. In this case the short-term cash funding of the company must be planned well so that it can honor the agreement, otherwise there is no essence of putting conditions in the agreement.
2. What are the ethical considerations in this case? Provide rationale for why these are ethical considerations.
Holding cash receipts book open to overstate the cash balance is fraudulent and unethical action. This behavior should not be encouraged by the managers. While referring to the concept of periodicity of accounting, there should be uniformity in the closing of books of accounts. For example, receipts of July 1st or July 2nd should be not be included in the balancing of 30th June. The can result to a lot of errors which are willful done in order to compensate each of the earlier errors made. When it comes to accounting, willful errors are referred to as frauds. Therefore there are critical ethical considerations for the receipt books to the required balance that is received.
2 What are the negative impac...

Updated on January 26, 2024

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The Ethics in Accounting

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