Reference no: EM13500058

I would record the expense even though I will not receive my bonus. My reasoning behind this is that it is the ethical thing to do. When a person starts to manipulate expenses for personal gain, that is when the act becomes unethical, illegal and against GAAP principles. If in the past the company has accrued the expenses and recorded only the supplies used, then not only is it ethical but depending on the other expenses and revenue received in December, I could possibly still get my bonus for the year. I tend to err on the side of caution and if there is any question about whether I should do something, I will do the right thing and record it instead of taking the chance of getting caught, causing my company to be audited or even losing my job. The $25k bonus isn't worth losing my job especially if I enjoy where I work and have been there for a while (Horngren, Sundem, Elliott and Phil brick, 2006).

Another reason is that if I don't record the expense, then the balance sheet, income statement, and the statement of retained earnings will all be incorrect. The income statement will overstate what the company net income is by understating the expenses that have been incurred. This in turn will affect the statement of retained earnings by overstating what the company's net retained earnings were. The balance sheet will be affected because the stockholders equity will be overstated by the addition of the retained earnings and supplies will be overstated as well. Another problem is that if the decrease in supplies isnt recorded, then the company might question why I would order supplies in January since nothing was recorded on the books. They might believe that the supplies were being taken by the employees instead of used by the company. Since all of these financials are looked at by the stockholders, and the governing bodies, it is best to record the expense and not receive my bonus then to cause the company and myself major embarrassment by not recording the expense. The numbers being reported have to be neutral with respect to the quality of information that is objective and free from basic. (Horngren, Sundem, Elliott and Phil brick, 2006).

In the case of recording an expense for financial gain on my part, this would violate the principle of neutrality. It also would violate the principle of validity. This principle states a correspondence between the accounting numbers and the objects or events those numbers purport to represent (Horngren, Sundem, Elliott and Phil brick, 2006).

If the expense isn't recorded in the books, then the numbers might be considered to be invalid and anyone looking at the financial statements would question if any of the numbers reported are accurate or valid. When dealing with financial statements and the cost not just internally but also externally as to reliable and valid information, trust is critical. If outsiders cannot trust that the information being reported is truthful, then the will pull their money out of a company and it could cause the company to go out of business. Once trust is lost in a company or the employees within a company, it is very hard to earn that trust back from the public or the consumer. For all of these reasons and many more, I would just bite the bullet, lose my bonus and report the expense. It definitely would make me think twice about how I would order and manage my department in the future and what steps I would need to take to not make the same mistake again (Horngren, Sundem, Elliott and Phil brick, 2006).