Question

You’ve just graduated from Berkeley College with a major in accounting and have landed your first accounting job. Your assignment at work today is to complete a Trial Balance. No matter what you do, you just can’t get it to balance and you’re off by $2500. You have a 5pm deadline for completion of the Financial Statements, which must be delivered to the bank this evening to comply with a major loan agreement. It’s now 3:30 and you’re worried that if you don’t get these statements done, it will cost you your job. You decide to increase the owner’s capital account by $2500 to get everything to balance and you complete the Financial Statements in time. You hope that no one will notice the error and you believe that you will be able to find and correct the error by the end of next month. Are your actions ethical? Why or why not? Did you have any other alternatives?

Answer 1

The action is purely unethical.

You should just not randomly put the difference in any of the accounts specifically be it owners capital as it is if not the most important but atleast a major part of financial statement of any organisation.

The more suitable approach in this case would be to transfer the unreconciled balance in a suspense account and put it balance sheet with a Note to fincial Statement stating why such a suspense has been created and possible steps organisation will undertake to set it off.