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In: Accounting

Robert Shah, a sales representative for Quality Office Supplies Corporation will receive a substantial bonus if...

Robert Shah, a sales representative for Quality Office Supplies Corporation will receive a substantial bonus if he meets his annual sales goal. The company’s recognition point for sales is the day of the shipment. On December 31st, Shah realizes he needs sales of $2000.00 to reach his sales goal and receive the bonus. He call a purchaser for a local insurance company, and asks him to buy $2000.00 worth of paper today. The purchaser says, “but Robert, that’s more than a year’s supply for us.” Shah says, “Buy it today. If you decide it’s too much, you can return however much you want for full credit next month”. The purchaser says “okay, ship it.” The paper shipped on December 31st and was recorded as a sale. On January 15th, the purchaser returns $1750.00 worth of paper for a full credit (approved by Shah) against the bill. Should the shipment at December 31st be recorded as a sale? Discuss the ethics of Shah’s actions.

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Expert Solution

ANSWER:

  • Ethics is the code of conduct applied in our everyday life. So as to thrive, each business houses ought to receive moral approaches to direct its business. Arrangement of money related reports ought to likewise be moral.
  • That is, all exchange ought to be recorded effectively and totally with the goal that the budget reports mirror the right image of the budgetary situation of the organization.
  • GAAP determines that so as to set up a moral monetary report legitimate Recognition, Valuation and Classification is important.

According to GAAP, acknowledgment of an exchange happens as under:

  1. When a buy request is gotten by the organization.
  2. Supplier acknowledges the request.
  3. Supplier dispatches the great.
  4. The purchaser gets the shipment alongside bill of installment from the provider.
  5. The purchaser pays the charged sum. Along these lines, the organization ought not perceive the deals made by Mr. Ron December 31, as a credit buy is made. It ought to be perceived as "Deals" when the purchaser really pays the charged sum.

In the accompanying case Mr. R made an offer of $2,000 on full credit on a condition to restore the sold products after December 31, with the goal that he can arrive at his objective. The sold great was returns on January 15. This activity of Mr. R is unscrupulous. R's main responsibility is to arrive at his objective by selling the merchandise of the organization, yet he attempted to trick the administration by demonstrating a bogus circumstance of deals and taking his reward. His activities are deceitful in nature.

ekkarill92 answered 10 months ago
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