Question

Ethics of Accounts Receivable:

List at least one way a person can perform unethical acts when handling accounts receivable within their business. Please try to use a different example than your classmates. You may use the internet for ideas. If appropriate, you may include a personal or professional experience in your example.

Answer 1

A person can perform various types of unethical acts when handling accounts receivable within their business.

Accounts receivable refers to those parties which are liable to pay money to the firm & company. In other words we can say a firm & company is authorise to receive money from these parties due to account sales to these parties. Hence various types of unethical acts of the employees can affect true value of accounts receivables.

First of all let’s know some major unethical acts with reference to handling accounts receivable;

1. Lapping of accounts receivable

2. Diversion of payment on old accounts

3. Creation of fictitious accounts receivable & sales

4. Using company accounts receivable as collateral for personal loan.

As per requirement of the question, now let’s understand one unethical act in detail when handling accounts receivable within their business;

Diversion of payment on old accounts

Sometime we see practically that employee of a company may involve in diverting funds from some old account. As we know that after writing off accounts receivable, a company does not keep records of such written off accounts receivable that is why an employee can easily divert funds received from such accounts receivable for his personal use. Hence it is suggested that a company should focus on such accounts receivable because it may happen that sometime a company have written off some part of accounts receivable from the books but these pay amount after some time hence this condition lead to unethical behaviour by an employee.