Cosmetic/Creative Accounting

Cosmetic/Creative Accounting Essay example
Masters
Essay
Finance & Accounting
Pages 7 (1757 words)
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Cosmetic accounting can be describe in different ways like it is referred as the terms of income smoothing , earning management , earning smoothing or somewhere as financial engineering. The methods of creative accounting are noteworthy because they remain in use as generally accepted accounting principal…

Introduction

Cosmetic or creative accounting is a process where accountant use their knowledge about accounting rules to change or manipulate the reported figures of the company’s business accounts.
Creative accounting also based on some unethical elements like as accounting details of a restaurant can be anything (true and fair). The creativity in such details is like showing a half glass of water as half-full instead of presenting it as half-empty. Both statements are correct but both can paint different pictures and create different images in user’s mind.
Sometimes, creativity accounting can be described as accounting manipulation. Accounting manipulation further defined as when accountants of companies intentionally misstate financial information to represent the good position of the entities. In addition in the case of non-profits organizations manipulate their reported program-spending to get more donations and incentives.
Cosmetic accounting can also be represented by the income smoothing technique. This consists in deliberate using of accounting policies to report the series of income as low from one period to another for the purpose of showing low wealth to shareholders. This way, the management can reduce the net income’s fluctuations from one period to another. ...
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