Question

Which of the following methods are used in creative accounting?
Off balance sheet financing
Abuses of accounting concepts and conventions
Manipulating assets and liabilities
Over and under valuation of inventories​

Answer 1

Answer:

Off balance sheet financing

Explanation:

The most widely used creative accounting techniques are:

Manipulation of off-balance-sheet financing items

Changes in accounting policies and depreciation methods

Manipulation of other income and expense items

Overestimation of revenues by recording fictitious sales revenues

Manipulation of receivables write-offs

Manipulation of accruals

Window dressing

Creative legal structures

Use of derivatives

Inappropriate accounting policies

Poor impairment tests

Assets not valued properly

Off-balance sheet (OBS) financing is an accounting practice whereby a company does not include a liability on its balance sheet. It is used to impact a company's level of debt and liability. The practice has been denigrated by some since it was exposed as a key strategy of the ill-fated energy giant Enron.

Answer 2

Answer:

Off balance sheet financing is used in creative accounting.

Explanation:

1. When a company uses such methods of recording financial information which are legal but don't show the real financial situation correctly and make the company seem more successful then it originally is, it is called Creative accounting.
2. The practice in which companies keep certain assets and liabilities from being reflected on the balance sheets is called off balance sheet financing. This results in helping the companies maintain low debt-to-equity and leverage ratios.

The most widely used creative accounting techniques are:

• Off balance sheet financing

• Changing accounting policies and depreciation methods

• Manipulating other income and expense items

• Overestimation of revenues by recording fictitious sales revenues.

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