Question

Bev Wynn, vice president of operations for Dillon County Bank, has instructed the bank’s computer programmer to use a 365-day year to compute interest on depository accounts (liabilities). Bev also instructed the programmer to use a 360-day year to compute interest on loans (assets).

Discuss whether Bev is behaving in a professional manner.

Answer 1

It is not an ethical behavior as he is trying to inflate profits.

take an example where there is a depository account of 10000

Deposit amount		10000
Number of days		30
Rate of interest		10%
Interest		82.19

Interest comes to 82.19 taking 365 days as base.

there is a loan given of the same amount with same rate of interest, then interest income in books will come to:

loan amount		10000
Number of days		30
Rate of interest		10%
Interest income		83.33

Clearly there is revenue excess of income= 83.33-82.19= 1.14 by manipulating computer system. hence it is not an ethical behavior