By the end of the year, the papers division of Doak Industries has exceeded budgeted profits by 18 percent. The controller, Ray Green, knows that his annual bonus depends on exceeding budgeted profit and that his bonus would plateau at 10 percent above budgeted profit. Ray expects that next year's profit plan would be similar but that next year's budget would consider the changes in the product lines. Ray discovered that he could accrue some of next year's expenses and defer some of this year's revenue while still exceeding budgeted profit by 10 percent.
Why would Ray, Doak's controller, want to defer revenue but accrue expenses and is this ethical?
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