Manipulate Company Document For Free

You can overstate sales in a number of ways. One way is failing to record selling expenses, such as allowances, discounts, commissions and returns. All of these costs reduce net sales, so omitting some of them will increase taxable income. Some companies are too aggressive at recognizing revenue.

It violates PC 532a(1) making false financial statements. If convicted of this crime, you could be facing up to 3 years in prison.

You arrive at net income when you subtract the tax on your taxable income. If you overstate net income, you inflate retained earnings and owner's equity, because you add net income to retained earnings at the end of the period.

If a company overstates assets or understates liabilities it will result in an overstated net income, which carries over to the balance sheet as retained earnings and therefore inflates shareholders' equity.

Shifting Current Expenses to an Earlier or Later Period Amortizing costs too slowly. Changing accounting standards to foster manipulation. Capitalizing normal operating costs in order to reduce expenses by moving them from the income statement to the balance sheet. Failing to write down or write off impaired assets.

Financial statement fraud is intended to mislead the users of financial information to create a better picture of the company's financial position, performance and cash flows.

When an accountant uses the term overstated, it means two things: The reported amount is incorrect, and. The reported amount is more than the true or correct amount.

Overstating Revenue Suppose company ABC is actually operating at a loss and not generating enough revenue. To cover up this situation, the firm might claim to be producing more income on financial statements than it does in reality. On its statements, the company's profits would be inflated.