Creative Accounting

Masters
Essay
Business
Pages 14 (3514 words)
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The globalisation regime has brought about many changes to the corporate landscape. Intense amount of competition amongst the rival brands and companies is one such change which has benefitted the consumers in general. …

Introduction

It has been pointed out that conflicting interests of shareholders and managers often lead to the use of creating accounting. After having successfully assembled the resources, the company is also required to assure all its stakeholders that it is indeed making good use of the resources in a manner benefitting all the stakeholders. In fact creative accounting is done very much within the legal framework and the prevailing accounting standards, but quite often done to camouflage the actual picture. It won't be an exaggeration if we say that creative accounting is done with the help of the weaker points in the law of the land and the accounting standards. Creating accounting has also been termed as 'window dressing', 'aggressive accounting' or 'fiscal gimmickry' by analysts from time to time.

People from outside the company as well as stakeholders from within the company make use of financial accounting details to arrive at a decision regarding their decision to continue with the company or look for a better opportunity. The shareholders will go through the financial details in order to figure out the profit margins and percentage their own earnings in the form of dividends, interests or bonus shares. Some of the inferences that could be drawn using financial accounting information include;

Creating accounting is therefore an effort to influence all these ind ...
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