1-When the FASB issues new pronouncements, the implementation date is usually 12 months from date of issuance, with early implementation encouraged. Karen Weller, controller, discusses with her financial vice president the need for early implementation of a rule that would result in a fairer presentation of the company’s financial condition and earnings. When the financial vice president determines that early implementation of the rule will adversely affect the reported net income for the year, he discourages Weller from implementing the rule until it is required.


Answer the following questions.

a. What, if any, is the ethical issue involved in this case?

b. Is the financial vice president acting improperly or immorally?

c. What does Weller have to gain by advocacy of early implementation?

d. Which stakeholders might be affected by the decision against early implementation?

2-What does debit and credit mean in accounting?

3-Why does a Balance Sheet have to balance.

4-Charlie Brown, controller for Kelly Corporation, is preparing the company’s income statement at year-end. He notes that the company lost a considerable sum on the sale of some equipment it had decided to replace. Since the company has sold equipment routinely in the past, Brown knows the losses cannot be reported as an unusual item. He also does not want to highlight it as a material loss since he feels that will reflect poorly on him and the company. He reasons that if the company had recorded more depreciation during the assets’ lives, the losses would not be so great. Since depreciation is included among the company’s operating expenses, he wants to report the losses along with the company’s expenses, where he hopes it will not be noticed.


(a) What are the ethical issues involved?

(b) What should Brown do?