1st Mark

only 100 wds

I think Raffies Kids should report the mortgage as a long term liability on their balance
sheet. Even though the board wants to pay the mortgage off in full next year, that does
not necessarily mean they will be able to. Under GAAP with a loan payable that
requires monthly payments for several years, only the principal due in the next twelve
months should be reported on the balance sheet as a current liability. (Balance Sheet)
Under this rule, I would advise the board to list the current liabilities for the mortgage as
$20,000 because that is the amount of principal due in the next twelve months.

Listing the mortgage as a long term liability will also make Raffies Kids current ratio
better. This could also help them within the next year if they decide not to pay off the
mortgage but want to expand their facility instead. A bank would see current liabilities as
a far lesser amount if the mortgage was under long term liabilities. I feel that listing the
mortgage as a long term liability follows more closely with the GAAP standards and will
also give the business more flexibility in the future. The unethical issue that would arise
from listing the mortgage as a current liability is the nonprofit business model and what
the board may be trying to do. By listing the mortgage as a current liability donors may
be inclined to give more money to Raffies Kids business because they think that the
business has a vast amount of current liability and could fail if donations are not
received. Adding the mortgage to the current liabilities is a sneaky way to look
desperate for funding even though the business is fine.


RESPONSE

Incredible portray yet I'll include something. I accept Company has a home loan
advance payable and is obliged to make regularly scheduled installments of $3,000 for
every month. Each of the regularly scheduled installments incorporates a $2,850
important installment in addition to more or less $1,50 of investment. This implies that
amid the following 12 months, the organization will be obliged to reimburse $34,200
($2,850 x 12 months) of main. The fundamental essential installments due inside one
year of the monetary record date must be accounted for as a current obligation. The
staying essential of $252,800 ($287,000 less $34,200) will be accounted for as a long
haul obligation.


REFRENCE:
"Professional Accounting Bodies' Perceptions of Ethical Issues, Causes of Ethical
Failure and Ethics Education" (Registration required). Managerial Auditing Journal 22
(9): 928
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2nd Tessa

only 100wds

I see this scenario from two point of views. The mortgage should be reported on the
balance sheet as a long-term liability, not a current liability. Long-term liabilities are
liabilities that do not need to be paid within one year or within the entitys operating
cycle, whichever is longer. Many Notes Payable are long-term, such as a mortgage on a
building. (Stat Nobles) Even though the board hopes to pay the mortgage off in full in
the next year, does not mean that they can report it is a current liability. Since it is
actually a long-term liability, it does not need to be paid within one year. The ethical
issue here is that technically it is a long-term liability, that is how a mortgage is
classified. If they report it as current liability, as previously stated, it would not be
reporting correctly.





On the other hand, if liabilities are liabilities that are due within the next 12 months, then
I could see how the non-profit organization would classify or reort the mortgage as a
current liability. If they are planning to pay it all in the year then I guess, maybe it could
qualify as a current liability. They should also keep in mind that An increase in
accounts payable decreases net income because of the associated expense. (Flows)

RESPONSE

Extremely Nice Actually Accounting is a vocation field where high morals and ethics are
imperative character characteristics for people. Dellaportas, Steven (June 2006). Poor
bookkeeping morals can lead organizations into liquidation from disgracefully reported
budgetary data. Extortion Accountants with poor moral norms may direct deceitful exercises, for
example, overbilling customers or deferring seller installments. Most extortion cases include
concealing money for inner purposes. Theft Accountants may steal from their executives when
given an excess of obligation and little oversight. These circumstances give bookkeepers more
control than would normally be appropriate and the capability to delude their superintendents on
budgetary data.
REFRENCE:
Dellaportas, Steven (June 2006). "Making a Difference with a Discrete Course on Accounting
Ethics" Journal of Business Ethics 65 (4): 391404.
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