Creative Accounting

Pages 8 (2008 words)
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Financial accounting involves the measurement of financial transactions of a firm and its presentation through various reports called financial statements.


Among the various stakeholders, investors and potential investors constitute the primary group for whom financial statements are basically intended. Investors put their hard earned money with a firm on the basis of the financial information exhibited by statements and their scrutiny. Therefore, accountants are bound to oblige the rules and regulations of accounting practices in the preparation and presentation of financial statements. These rules are framed by accounting bodies of a country in line with international accounting standards. Nevertheless, some accounting standards are violated by accounting professionals/firms for their personal gain. Such practices are illegal and against the ethics of accounting professionalism. Many such practices have been observed from different parts of the world. Such a practice is known as creative accounting. Creative accounting is a sort of accounting scam, which does not follow the accounting rules and principles as such or finds the loop holes in the accounting rules for the benefit of the preparers and those at the helm of the organization. This essay is meant to detail the basics of creative accounting and the reasons thereof. ...
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