ACCOUNTING NOISE 2
Basically, Accounting is a common sense way of looking at and recording your wealth and how changes in your income and expenses affect it –whether you are a corporation, a small business which is a corporation or a small business which is a proprietorship, or whether you are looking at and recording your own personal wealth, income and expenses.
A company who has had a poor performance resorts to “accounting noise” to make it look better than it really is.
Usually, this is done by declaring as revenue a transaction which has not yet been completed (or where the company has not yet realized an income). A prospective income or sale is booked as if it is already a done deal. In effect, the company is “borrowing” income from a future which may or may not happen.
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POSTED IN: Accounting for NonAccountants, Random Thoughts on Accounting
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