PRINCIPLES OF ACCTG – HW 1 EXTRA

 

FROM THE TEXT

Horngren, C.T., Harrison, W.T., and Oliver, M. S. (2009). Accounting: Chapters 1-14: 2009 (9th ed.).  Prentice-Hall, Upper Saddle River, NJ: Pearson. ISBN 0-13-256905-7

Please read the Ethical Issue in Chapter 2 on page 128.

In your first post please address the following:

1 –What is the ethical issue in this situation?

2 –State why you approve or disapprove of Henson’s management of Better Days Ahead’s funds.

In your second post comment on one of your classmates posts. For example:

Do you think that your classmate should have included another factor? Why or why not?

discussion board: 1

In my opinion the ethical issue is the accounting equation of the company.If the accounting equation must always be balance,the manager must recorded each transaction using a double entry system where debits equals credits.We have no information about this type of expenses and why manager decided to do it.


 An account with a normal debit balance may occasionally have a credit balance.Thats indicates a negative amount of the item-in this case Cash.Also the liability Accounts payable -a credit balance account-could have a debit balance if the company overpays its account payable.In other cases , a non normal account balance indicates an error.
In this case a non normal credit balance in office supplies,furniture or buildings makes no sense because negative amount of this assets make no sense.The ethical issue appears because the money he is using not even exists-he is expending money is not made and putting the company on risk, by increasing liability.
I do not agree with this style of management, but I know in real life many companies take high risk to obtain high profit.In the case of Better Days Ahead the transparency and good management are vital to obtain fundraising. This company is a charitable organization and must be an example of good financial behavior and manage its funds wisely in order to keep donations and business running .Any type of scandal or corruption could put the whole organization at risk.In this particular case manager must be extra careful when front ethical dilemmas.We must remember ethics demands more than legal- sometimes it is legal but still unethical.

2. The actions of the new president are questionable as he takes advantage of the trust that First Nations Bank has in the organization, the bank knows that the organization rarely even makes use of the overdraw in the first place, so the bank has no qualms on allowing the overdraw or how much the organization can exceed their limit. This of course is taking advantage of the banks good business standing that has been forge over long periods of excellent relationship, this is a bad business move from the new president as it places the organization in a horrible position and may even jeopardize any future support from the bank. This is also an unethical thing to do, as the president is overdrawing on money that the organization may not be able to repay back to the bank, specially if the investments on the charity do not return the amount of money already borrowed. This is made more drastic as the bank allowed the organization to borrow money if they were ever left short from donations, yet the president borrowed and spend the money as he saw fit

Maybe you agree with your classmate, but for another reason that he/she stated. If so, explain.

 

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