Question

If a company using accrual-basis accounting wanted to overstate their income at the end of the fiscal year with increased shipments, the two accounts that would be most at risk are:

Answer 1

The two accounts that would be most at risk are: Sales and Accounts Receivable

Accrual method of accounting is an accounting method that reports on the company book  revenue and expenses as they occur in which assets are then adjusted when revenue and expenses are paid.

Assuming  a company or organization are to increased shipments which they are  having doubt about as to whether those shipment would either be returned or not paid for.

The company book would show increase in income and increase in account receivable as the company is yet to receive payment for the goods that were shipped.

In a situation were the goods that was returned are high which means that at the end of the fiscal year both sales and  account receivable account will be affected.

Inconclusion The two accounts that would be most at risk are: Sales and Accounts Receivable.

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