The Importance of Timing in the Recording of Purchases and Ethical Standards

The Importance of Timing in the Recording of Purchases and Ethical Standards

As the new accountant for Hiller Corporation, I consider the sales transaction done on 8th February to be a transaction of February and not January. Therefore, I will record a $50,000 inventory sale for February. In FOB destination, a sale is considered to have occurred when goods are received at the buyer’s destination. While the goods are in transit, they legally remain under the leadership of Hiller Corporation. Notably, this means Hiller Corporation should consider the goods inventory and not be recorded as revenue. Recording it as revenue will only lead to an overstated revenue account recommended when considering an ethical perspective (Kolawole et al., 2019). Timing is an important aspect of recording purchases, and proper timing is an ethical behavior that businesses should uphold (Chychyla et al., 2019). This is so because unethical businesses can get desperate to reduce losses and show profits and thus resort to misleading timing differences, a major concern for accounting practices.

References

Chychyla, R., Leone, A. J., & Minutti-Meza, M. (2019). The complexity of financial reporting

standards and accounting expertise. Journal of Accounting and Economics, 67(1), 226- 253.

Kolawole, A. D., Akomolafe, A. B., & Olusipe, B. J. (2019). Inventory management: An impetus for increased profitability in manufacturing firms. International Journal of Accounting, finance and Risk Management, 4(4), 1-6.

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Hiller Corporation manufactures electronic components and never closes its books until at least ten days after the month’s end. This way, it can sort out ownership of goods in transit, and document which goods were received by month end, and which were not.

You’ve just graduated from Strayer University with your bachelor’s degree in accounting and have been hired by the Hiller Corporation as a new accountant. Your supervisor asks you to record the 8th of February’s $50,000 inventory sales transaction that is FOB destination to be part of the month of January revenue account.
As an accountant, how would you handle the above situation? Include concerns about the importance of timing in the recording of purchases and ethical standards.