Explain the Objectives of Creative Accounting.
Answers
Answer:
Creative accounting involves imaginative ways of presenting the account.
These may not be in line with the accounting laws, but they are are not illegal.
The objective of this method of accounting is to make the company appear financially healthy than what it really is.
Creative accountant sometime manipulates their company’s asset to conceal problem areas, they may practice off-balance-sheet account for this.
Creative accounting is a concept which may or may not use the accounting principles to bring about the desired picture in the business of a firm. The motives of creative accounting is to,
- tackle competition.
- attracting the investors.
- improve or maintain performance.
Creative accounting may bring economic benefits in the short term however, it would create great damages in the long term if not used properly.