Accounting for Non-Accounting Majors free essay sample

This paper seeks to determine whether given situations for Fitness Solutions are ethical or unethical after this researcher’ has defined what is ethical vs. unethical.   This paper will also answer whether what is ethical equates with what is legal with the needed justification for the position taken.   In addition, this will also identify the effects on the financial statement and decide whether the events reflect errors or deliberate fraud by Fitness Solutions. This researcher defines what is unethical as something that violates the idea of fairness or justice as when it unfairly causes a net disadvantage to stakeholder and a net advantage in favor of the decision-maker (Henderson, et. al, 2005).   Therefore, an act is presumed ethical if there is no evidence that it not fair or just to all concerned.   While what is ethical does not necessarily equate with what is legal, sometimes, that two could be equal if the effect of the legal act would be an ethical act. We will write a custom essay sample on Accounting for Non-Accounting Majors or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page To apply the definition to the situations, this researcher asserts, the first situation – when Fitness Solutions changes from LIFO inventory method to FIFO method, which directly affects inventory balances and income taxes is ethical.   Said first situation is not unethical because changing from LIFO to FIFO would instead increase ending inventory balance and could even income increase taxes.   In fact, LIFO was planned to be banned under the international accounting standards (Bahnson and Miller, 2004). The act is actually against the interest of Fitness Solutions and yet if the company was just doing what is legally correct in accordance with accounting standard, the same act of changing method may just be correcting an error and therefore id not engaged also in deliberate fraud.   On other hand, the second situation of recording the cost as prepaid assets, instead of as expenses, is also allowed by present accounting rules, as it is in fact the correct one. Theoretically speaking, an expense must be recognized when it related revenue is earned under the matching principle of accounting.   Recording as assets would not overstate expenses and therefore it would comply with the accounting principle.   As such, the same act is also ethical and that the company does the correct accounting practice and does not engaged in any deliberate fraud.   It is not even correcting any error to do the second act. To conclude, as Fitness Solutions does ethical acts, it should not worry about its consequences. References: Bahnson, P. and Miller, P.   (2004), It is time to get rid of LIFO conformity: IASBs move to ban LIFO deserves a thoughtful response, Strategic Finance Henderson, S, Peirson, G Herbohn, K  Ã‚   (2005), Issues in financial accounting, 12th edn, Pearson Education, Australia, Frenchs Forest, NSW, pp. 958–83