Question

How do you feel Symington should have recorded these transactions? Why?

A) By debiting Cost of Goods Sold $10,000 and crediting Inventory $10,000.
B) By debiting Inventory $10,000 and crediting Cost of Goods Sold $10,000.
C) By debiting Profit $10,000 and crediting Loss $10,000.
D) By debiting Personal Expenses $10,000 and crediting Business Revenue $10,000.

What are the ethical implications of Symington's actions?
A) Ethical as it's a small amount.
B) Unethical as it distorts financial records.
C) Ethical if the merchandise is returned.
D) Ethical since it's for a personal event.

Answer 1

The answer is B) Unethical as it distorts financial records.

Step-by-step explanation:

The correct way for Symington to record these transactions is A) By debiting Cost of Goods Sold $10,000 and crediting Inventory $10,000. When goods are sold, the cost associated with those goods needs to be moved from Inventory to Cost of Goods Sold. This reflects the expense of the goods that have been sold and reduces the Inventory account accordingly.

Regarding the ethical implications of Symington's actions, the answer is B) Unethical as it distorts financial records. Regardless of the amount or situation, accurate recording of transactions is crucial for maintaining the integrity of financial statements. Misrepresenting financial records, whether for personal gain or otherwise, is against the principles of accounting ethics.