Accrual accounting matches revenue with expenses, but accruals can be used to manipulate income and expenses. In the Forbes article Cash Doesn’t Lie (Links to
an external site.), author Daniel Fisher discusses the use of negative accruals, changes to estimates, and recognizing income before it is earned. Read the
article and then
Discuss the use of each of these three techniques and their effect on current and future earnings reporting.
Explain how changes of accounting estimates that significantly affect income should be reported.
Should they be regarded as a change in accounting principle?
Research revenue recognition and discuss the accounting rules violated that brought down the company Sunbeam.
Sample Solution