Question

What effect does lowering the estimate for doubtful accounts have on the income statement and balance sheet? Do you believe Blair’s recommendation to adjust the allowance for doubtful accounts is within his rights as manager, or do you believe this action is an ethics violation? Justify your response.

Answer 1

Answer no 1  

Bringing down the estimate for far fetched accounts makes the benefit bigger by paying off Bad Debt Expense and makes the Balance Sheet look better by exaggerating Assets. Since the contra-resource Allowance for Doubtful Accounts would be downplayed.  

Answer no 2  

This activity of change the stipends for far fetched accounts isn't inside the rights and zone of control of a director and is a moral infringement. No chief ought to have the option to transform anything inside the bookkeeping capacity. A supervisor ought to deal with the business, not the accounting for that business.