Answer:
creative accounting/earnings management
Step-by-step explanation:
AI-generated answer
When a business manipulates its accounts to present a better financial picture than its actual state of affairs, it is referred to as "creative accounting" or "earnings management." This practice involves intentionally distorting financial information to mislead stakeholders about the company's performance. Creative accounting techniques can include:
1. Revenue recognition manipulation: The company may recognize revenue prematurely or delay its recognition to manipulate financial results.
2. Expense manipulation: Expenses may be deferred or accelerated to artificially improve profitability.
3. Overstating assets or understating liabilities: The company may inflate the value of its assets or hide its liabilities to present a healthier financial position.
4. Off-balance-sheet financing: This involves moving debt or assets off the balance sheet to create a more favorable financial position.
5. Cookie jar reserves: Companies may manipulate their reserve accounts to smooth out earnings and create the illusion of stability.
It's important to note that creative accounting is unethical and can be illegal. Regulatory bodies and auditors work to detect and prevent such practices to ensure transparency and accuracy