Creative Accounting - A study of Innovation in Accounting

Abstract

Accounting is the language of business. Accounting has rightly been termed as the language of the business. The basic function of a, language is to serve as a means of communication. Accounting also serves this function. A large number of transactions take place in the business everyday which have to be analysed, it would be practically impossible to remember all the transactions in a systematic and chronological order and this is done with the help of accounting which involves the accounting cycle of recording the transactions in the journal, posting them in the ledger, preparing the trial balance and analyzing the balances of ledger accounts by preparing the final account.Hence all the business concerns, small or big, are relying on recording of transactions and preparing the accounts to have an accurate result of the organisation replacing tlte human memory. Today there is a greater need for co- ordination and control. Creative Accounting is a technique of accounting in which accounting practices deviate from standard accounting practices in order to manipulate the accounting figure of a company to increase its earnings and subsequently get a bonus, it is based on stock performance. And it facilitates increases or decreases the revenue or profit or earnings per share through aggressive accounting tactics. Moreover, creative accounting focuses on different aspects like unsuitable revenue, recognition, inappropriate accruals and estimates of liabilities, excessive provision s and generous reserves and int entional minor breaches of financial reporting requirements that aggregate material breach.