Chapter 4 Fraud & Financial Cases - HORNGREN'S ACCOUNTING Eleventh Edition Ethical Issue 4-1 Grant Film Productions wishes to expand and has

Chapter 4 Fraud & Financial Cases - HORNGREN'S ACCOUNTING...

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HORNGREN'S ACCOUNTING - Eleventh Edition Chapter 4: Completing the Accounting Cycle Page 1 of 4 Ethical Issue 4-1 Requirements 1. 2. Solution: Requirement 1 Date Accounts and Explanation Debit Credit 31 Dec Accounts Recieveables 10,000 Revenue 10,000 As a result, Accounts Receivable will tend to increase which will result in an overall incr in Current Assets. On the other hand as nothing has changed in the section of Current Liabilities so it would remain the same. Hence it will result in a change in the Current R Requirement 2 Recording the revenue which the firm has not made seems to be unethical in nature. The principle of Revenue Recognition will be used by the firm. It will help the company look financially better as it will result in an increase in its Current Ratio. . It may not be unethical but false indication as well to attract more capital. However another thing to be kept in mind is the decrease in the loan provided by the bank due to the wrong information been provided to them.
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