Question

Anton Blair is the manager of a medium-size company. A few years ago, Blair persuaded the owner to base a part of his compensation on the net income the company earns each year. Each December he estimates year-end financial figures in anticipation of the bonus he will receive. If the bonus is not as high as he would like, he offers several recommendations to the accountant for year-end adjustments. One of his favorite recommendations is for the controller to reduce the estimate of doubtful accounts.1. What effect does lowering the estimate for doubtful accounts have on the income statement and balance sheet?
2. Do you believe Blair's recommendation to adjust the allowance for doubtful accounts is within his right as manager, or do you believe this action is an ethics violation? Justify you response.
3. What type of internal controls might be useful for this company in overseeing the managers recommendations for accounting changes?

Answer 1

Most corporations count revenue, not when payment is received, as when sales occur.

Explanation:

1. Doubtful accounts or account holders, in which you fear you will not be paid, are excluded from taxes, which raises the net income recorded by the corporation.

2. Not as a boss with her property. She shall be an agent as a boss working for the good of the business owner. When the only reason she makes improvements to her accounts is to maximize her salary, she places her own future in the hands of the interests of the company / owner. Especially as it may affect the company's decision making by changing its net income. Unless she has a valid reason to reduce questionable figures of account, Then she did not commit an ethical breach but as the trigger makes clear she takes her decisions on the grounds of the desire to reduce her own income, even though she is no more the owner's loyal employee.

3. In any incident that an accounting transition affects the remuneration of the manager, the manager should provide a short justification that should be submitted to the owner or the board of directors.