Motivation
The paper gives the empirical evidence of earning in management and its implications to the accounting standards. Standard setting defines the communication under which the management uses to communicate to the state holders. The paper delves into the primary purpose of standard setting in accounting. The final financial result of the organization’s activities is the result of a comparison of revenues and expenses (Ali, Noor, Khurshid, and Mahmood, 2015). If incomes exceed expenses – in accounting should be reflected profit, if expenses have exceeded incomes – it is necessary to reflect a loss. It occurs when the management manipulates accounting results to give a false impression to the stakeholder’s
The income of the organization is recognized as an increase in economic benefits as a result of the receipt of assets (cash, other property) and (or) repayment of liabilities, resulting in an increase in the capital of this organization, with the exception of the contributions of participants (owners of property). Incomes of the organization do not recognize income from other legal entities and individuals (Beaudoin, Cianci, and Tsakumis, 2015):
Expenditures for ordinary activities are the costs associated with the manufacture and sale of products, the acquisition and sale of goods. Such expenses are also considered to be expenses, the implementation of which is related to the performance of work, the provision of services (Chi, Hung, Cheng, and Lieu, 2015).
In other words, incomes and expenses from the basic statutory activity of the organization are considered as incomes and expenses on usual kinds of activity.
To reflect in the accounting of information on incomes and expenditures from ordinary activities, account 90 of “Sales” is intended.
It must be remembered that, as incomes lead to an increase in capital, the formation of which is reflected in the accounting on a loan, then the credit principle is used when income is reflected.That is, the recognition in accounting of the amount of revenue from the sale of goods, products, works, services is reflected in the credit account 90 “Sales”( Elyasiani, Wen, and Zhang 2017).The expenses incurred by the organization are ultimately aimed at obtaining future economic benefits, and, therefore, corresponds to the main criterion of classifying assets as assets.
In accounting, revenues from ordinary activities are reflected in account 90 “Sales”, extraordinary income is reflected in account 99 “Gains and losses.”
– income from transactions with financial instruments of futures transactions that do not circulate on the organized market (Koo, Song and Paik, 2015).
Literature review
On the approval of the form of the tax declaration on the profit tax of organizations and the procedure for its completion”, organizations can be recommended to build analytical records on accounts 90 “Sales” and 91 “Other income and expenses” in such a way that the above indicators are formed on them.
The method of accrual is as follows: income is recognized as such in the reporting (tax) period in which they occurred (to which they relate), and regardless of the actual receipt of funds or other form of payment, incomes are distributed by the taxpayer independently, taking into account the principle of uniform recognition of incomes and expenses in the event that the following two characteristics are present: – revenues refer to several reporting (tax) periods – the relationship between income and expenditure can not be determined clearly or indirectly (Fang, Huang, and Karpoff, 2016).
Many of the companies pay their CEOs top dollar. Their emoluments include salaries, allowances, and of year bonuses. CEO of top listed companies have the best and the most competitive pay packs ever. In incentivizing a CEO, many factors have to be factored in including; performance, experience, strategy and competition(Shahzad, Rauf, Saeed, and Al Barghouthi, 2017). Accounting for all incentives of CEOs in monetary values include; bonuses and salaries, shares owned, stock options, and the changing likelihood of dismissal. A $ 1000 change in corporate value is equivalents to a compensation of a CEO of $2.59.
Gain sharing bonus schemes focuses on the efficiency of savings and the reduction of costs in an organization. The bonus scheme gain sharing formula enable organizations and employees to share savings and financial gains made by the company due to performance improvement.
It is a draw back of the companies equity to reward or compensate employees. It is also known as stock option or ESOPS which is given to employees to attract and endeer them to the company. It makes them to behave in certain ways and align with all the shareholders of the company.
This are the cost associated with politics of a country or an organization to the performance of the business. Political costs may be high or low depending on the volatility and temperature of politics in the country of operations.
Accounting is an ancient science. It goes back to the times when people just started to create their own society. Starting to engage in gathering and hunting, they began to use tools, it became necessary to keep records of the mined.
Implication of earning management
Import relief are the specific measures imposed by a government when there is a desire to temporily restrict or suspend the importation of products for protection of local manufacturers from any competition. Import relief is usually a form of subsidie and tax relief for the domestic manufacturers.
Accounting, unlike other types, is a system (Shahzad, Rauf, Saeed, and Al Barghouthi, 2017). That is, every operation of the organization’s economic life must be reflected in it. Economic processes are summarized in accounting as a movement of value. This allows you to get information about the newly created value, about allocations and redistributions. It is a reflection of all production processes that are actually going on in the enterprise, and thus serves as a basis for business planning. Accounting plays an extremely important role in the valuation of accounting items and the calculation of their cost.
Conclusion
The economic indicators that are necessary for planning, organizing and evaluating the enterprise’s production and economic activities, the formation and use of special funds, and the comparison of costs and results at individual stages of the reproduction process are the basis of the modern market mechanism. That is why it is so important for managers and financial managers to have modern methods of effective management of revenue generation in the process of operating, investment and financial activity of the enterprise among their skills (Soliman, and Ragab, 2014).
References
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Beaudoin, C.A., Cianci, A.M. and Tsakumis, G.T., 2015. The impact of CFOs’ incentives and earnings management ethics on their financial reporting decisions: The mediating role of moral disengagement. Journal of business ethics, 128(3), pp.505-518.
Chi, C.W., Hung, K., Cheng, H.W. and Lieu, P.T., 2015. Family firms and earnings management in Taiwan: Influence of corporate governance. International Review of Economics & Finance, 36, pp.88-98.
Elyasiani, E., Wen, Y. and Zhang, R., 2017. Institutional ownership and earning management by bank holding companies. Journal of Financial Research, 40(2), pp.147-178.
Fang, V.W., Huang, A.H. and Karpoff, J.M., 2016. Short selling and earnings management: A controlled experiment. The Journal of Finance, 71(3), pp.1251-1294.
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