Accounting fraud is actually a planned and wrong handling of the recording of sales revenue and/or expenses in order to make a company's profit performance appear better than it actually is. Some things that firms do that can constitute fraud are:
--Not listing prepaid expenses or other incidental assets
--Not showing specified classifications of current assets and/or liabilities
--Collapsing short- and long-term debt into one amount.
Over-recording sales revenue is actually the most regular system of accounting fraud. A Small Business Accounting Software business could distribute products to customers that they generally haven't prepared, knowing that thing that those customers will generally return the products after the end of the year. Until the returns are made, the business records the shipments as if they basically were actual sales. Or a business may engage in channel stuffing. It in general terms provides products to dealers or final customers that they really don't wish for, but business makes deals on the side that provide incentives and special privileges if generally the dealers or customers do not object to taking premature delivery of the products. A Small Business Accounting Software business may also delay recording products that in a fact have been returned by customers to stay away from recognizing these offsets against sales revenue in the current year
The other manner a business commits accounting fraud is basically by under-recording expenses, such as not recording depreciation expense. Or a business might choose not to record all of its cost of goods sold expense fore the sales made during a period. This typically would make the gross margin higher, but the business's inventory asset would normally include products that basically are not in inventory because they've been delivered to customers.
A business might also choose not to record asset losses that should be recognized, such as uncollectible accounts receivable, or it might not write down inventory under the lower of cost or market rule. A Small Business Accounting Software business might also not record the full amount of the liability for an expense, making that liability understated in the company's balance sheet. Its profit, therefore, would be overstated.
--Not listing prepaid expenses or other incidental assets
--Not showing specified classifications of current assets and/or liabilities
--Collapsing short- and long-term debt into one amount.
Over-recording sales revenue is actually the most regular system of accounting fraud. A Small Business Accounting Software business could distribute products to customers that they generally haven't prepared, knowing that thing that those customers will generally return the products after the end of the year. Until the returns are made, the business records the shipments as if they basically were actual sales. Or a business may engage in channel stuffing. It in general terms provides products to dealers or final customers that they really don't wish for, but business makes deals on the side that provide incentives and special privileges if generally the dealers or customers do not object to taking premature delivery of the products. A Small Business Accounting Software business may also delay recording products that in a fact have been returned by customers to stay away from recognizing these offsets against sales revenue in the current year
The other manner a business commits accounting fraud is basically by under-recording expenses, such as not recording depreciation expense. Or a business might choose not to record all of its cost of goods sold expense fore the sales made during a period. This typically would make the gross margin higher, but the business's inventory asset would normally include products that basically are not in inventory because they've been delivered to customers.
A business might also choose not to record asset losses that should be recognized, such as uncollectible accounts receivable, or it might not write down inventory under the lower of cost or market rule. A Small Business Accounting Software business might also not record the full amount of the liability for an expense, making that liability understated in the company's balance sheet. Its profit, therefore, would be overstated.
About the Author:
Krishna Sri is a learned software developer,to their credit is an economical Small Business Accounting Software,for more information visit Accounting Software
