Question

On January 14, 2022, Tamira Nelson, the accountant for Picton Enterprises, is feeling pressure to complete the annual financial statements. The company president has said he needs up-to-date financial statements to share with the bank on January 15 at a dinner meeting that has been called to discuss Picton's obtaining loan financing for a special building project. Tamira knows that she will not be able to gather all the needed information in the next 24 hours to prepare the entire set of adjusting entries. Those entries must be posted before the financial statements accurately portray the company's performance and financial position for the fiscal period ended December 31, 2022. Tamira ultimately decides to estimate several expense accruals at the last minute. When deciding on estimates for the expenses, she uses low estimates because she does not want to make the financial statements look worse than they are. Tamira finishes the financial statements before the deadline and gives them to the president without mentioning that several account balances are estimates that she provided.

Required

1. Identify several courses of action that Tamira could have taken instead of the one she took.

2. If you were in Tamira's situation, what would you have done? Briefly justify your response. You will be graded based on the rubric below In the rubric, you will notice that you get 20 points by responding to two other learners, "I agree" will not count as a post. You must critically think about these responses.

Answer 1

solution 1 : There are 2 possible way to deal with situation as given below :-

I) Tamira should consult with president about the current situation of the financial position and its completeness regarding the adjusting entries . she convience the president to resecheduled the meeting or asked the president how they proceed further.

II) Tamira should apply GAAP and record the adjusting entries accoardingly as GAAP favors Accural base accounting procedure in which revenues are recognised when they earned and expenses are matched accordingly .

solution 2 :

If I had been in Tamira’s situation, I would not have intentionally inflate or deflate the figures to make financial statements give a better financial outlook. While presenting the draft and final year-end financial statements I would have told the numbers on which estimations were used and it's reason.

I would definitely apply the Accural Method of accounting and prepare to adjust entries accordingly .I would have inform the president also that the financial statements be are required to audited by an independent firm and thus would not be able to publish any financial statements to external user prior to the audit being complete and passing.

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