4. THE BOTTOM LINE
Introduction
Creative accounting takes advantage
of loopholes to falsely portray a company’s financial
health as better than is actually the case.
While creative accounting is legal,
it can lead to accounting fraud, which is illegal.
Creative accounting or aggressive accounting is a
method used to manipulate financial figures.
It does not violate the letter of the law or accounting
standards but it is very much against their spirit.
Moreover, creative accounting certainly does not provide
the true and fair view of an enterprise that accounts
are meant to project.
5. MEANING
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6. The main goal is to manipulate
financial statements that enhances
Profitability , Liquidity or overall
financial health
MOTIVES FOR
APPLYING
CREATIVE
ACCOUNTING
MISSION:
* Obtaining personal gain
*Competition
*Attracting investors
*Increasing or maintaining the level of
Capital
*Buying time for not settling debt
*Forecasts about future company
performance
VISION:
7. Income
Smoothing
Capitalization
TECHNIQUES OF CREATIVE ACCOUNTING
Aggresive
Changing
Depreciation
Off-Balance
sheet
it is to Fluctuate income over time.
capitalizeing cost as assets on balance sheet , for boosting
short term profit.
strategy to move certain assets, liabilities or transactions away
from balance sheet.
Altering Depreciation calculated as it can affects the timing of expenses
potentially profit in short time.
Intentionally increasing accurals to make finance appear more Solvent.