Secret reserve accounting is likely to create conflict between Essay

Secret bind accounting is belike to bring to pass conflict between management, shargonholders and employees - Essay ExampleIt would represent the surplus of available assets over the capital and liabilities. It is not apparent in the ledger too. Creating under direct reserves is likely to strengthen the financial situation of the government concerned. The actual financial mail and the financial position observed through the balance sheet would be different the financial position of the company would be stronger than its apparent situation on records. As a result, conflicting inferences are likely to be obtained when it comes to secret reserve accounting. Creating secret reserves volition emphatically involve the management, approximately of the employees and the shareholders are likely to remain in dark. Secret reserve accounting will not show even under the suspense account and affect the capital flow in a concealed fashion. Undervaluation of available assets, omitting the rise in asset values, providing extra depreciation on the assets that are fixed, etc. are the methods of secret reserve accounting. In this context, the question is in the form of the following contestation Secret reserve accounting is likely to create conflict between management, shareholders and employees. Critically discuss. ... After that, the unhomogeneous conflict scenarios between the management, shareholders and employees will be critically discussed. Last, the conclusion will be drawn with the concluding opinion about the research statement. Literature Review The academic literature in the context of secret reserves reveals interesting opinions and scholastic approaches. First, a view on the nature and scope of secret reserve as an accounting term should be considered. Secret reserves this accounting term has been made to cover a multitude of sins whenever objection is taken to pessimistic writing off of invested values, or disproportionate charges of depreciation, or again to charges to operations or revenue, for capital expenditures which should have been applied to the increase of assets, the answer is, secret reserves. (Esquerre, 1978) So if the owner of a corporation is creating secret reserve and implementing related accounting practices, his/her capital assets have likely been knocked down into the pit of secret reserves and that their book value, as it stood at the time, was likely preposterous. Hence the questions in issue would be Does the owner want to deceive the shareholders, the government, the public or his own self? Does he wish to submit to the directors, the shareholders, the banks and the public, financial statements with a mental footnote to the effect that things are not in truth what they would show on their face? And if it is well to hide the owners wealth from some people (in his perspective), can it be believed that anyone capable of reading balance sheets is not in a position to follow accounting facts from year to year , and to point out fluctuations in wealth not supported by the statement of income submitted, and thus unearth secret