ACCOUNTING NOISE 3

A company who has had a poor performance resorts to “accounting noise” to make it look better than it really is.

One way is to fudge income figures (e.g., declaring prospective income that has not yet been realized).

Another way is to fudge expense figures. In effect, postponing expenses incurred during a period to the future –violating the generally accepted accounting principle of matching expenses with revenues. Expenses are properly recorded in the same period that related revenues are realized.

Image from Microsoft Clipart