3. • Introduction
Meaning
Definition
• Accounting practices that follow required laws and
regulations but capitalize loopholes in accounting
standards to falsely portray a better financial image of
company.
• The exploitation of loopholes in financial regulations in
order to gain advantage favourable light.
4. Advantages and
disadvantages
• Advantages of creative accaccounting:
1. It helps to solve financial crimes.
2. It helps to monitor professionals.
3. It helps Businesses with their finances.
• Disadvantages of creative accounting:
1. It takes a lot of time.
2. It can be expensive.
3. It can be distracting.
4. It can affect employee morale.
5. creative
accounting
used to:
1. Hide a particularly bad year for the company.
2. Force an exceptional good year.
3. Continue the pressure to always be the best.
4. Smooth out results to give an impression to stability or
substained improvement.
5. Boost assets to avoid take over.
6. Survive from bankruptcy.
7. Profit more.
8. Pay less tax.
9. To attract investors.
10. To increase (fake) transaction.
6. Methods of
creative
accounting
1. Wrong estimation of inventory in stores.
2. Failures to make proper contingent liabilities.
3. Booking less expenses.
4. Willfully attempting to manipulate
depreciation figures and methods.
5. Manipulating revenues and sales figures.
7. Conclusion
• Creative accounting is an practice that
help the company deviate from the profit
and revenue for the year by following rules
and regulations. It is a skill that experts best
handle the loopholes in the system, and the
method should be ethical; otherwise, it can
be a severe problem for the company’s
management.