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Is My Boss Asking Me to Manipulate the Books?

Hello!

I’ve been working as a bookkeeper for a very small business for around 15 months. Recently, my boss made a request that has left me questioning whether it’s typical industry practice or potentially unethical.

Here’s how our process usually works: We sell flooring and collect a 50% deposit at the time of order. We then issue an invoice for the sales order and collect the remaining balance when the customer picks up their product. We use QuickBooks Desktop, recording deposits as credits and depositing them in our account, which are then applied to the invoice once the product is collected.

However, yesterday my boss asked something unusual. He wants me to hold off on marking products as picked up or invoicing sales orders until the year ends. Instead, he instructed me to record all received payments as deposits and wait to generate invoices and apply these credits after January 1st. He claims this is an annual practice, but I don’t recall us doing this last year.

Could this be a way of artificially deflating our 2024 income? Or am I misunderstanding the situation? I’m based in the USA, specifically Illinois. I wonder if this is an accepted practice that I’m simply not familiar with.
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It sounds like your boss is potentially asking you to engage in a practice that might manipulate financial records, commonly known as “cooking the books.” Let’s break down what’s happening and why it might be a concern:

Understanding the Request

Current Accounting Practice:
Your standard process involves collecting a 50% deposit, recording it as a credit, and then applying this credit to the invoice once the product is picked up.
Proposed Change:
The request is to continue collecting deposits but delay marking products as picked up and delay invoicing until after the end of the year. This essentially defers revenue recognition from 2023 to 2024.

Potential Reasons for the Request

Tax Implications:
Deferring revenue recognition to the next fiscal year can reduce taxable income for the current year, potentially lowering the tax liability for 2023. This is a common motive behind financial reporting manipulations.
Financial Reporting:
Enhancing the appearance of financial performance by shifting revenues can be used to influence stakeholders’ perceptions, such as investors, lenders, or owners.

Ethical and Legal Considerations

Ethical Concerns:
Financial statements are supposed to present an accurate and fair view of the company’s financial condition. Deliberately deferring revenue recognition can mislead stakeholders and might be considered unethical.
Legal Considerations:
Accrual Accounting: If your business uses accrual Accounting (common in the USA), revenues should be recognized when they are earned, not when the cash is received.
Revenue Recognition Standards: The revenue recognition principle dictates that revenue should be recognized in the period in which the goods are delivered or services are rendered.
IRS Regulations: Intentional misreporting of when income is earned for tax purposes can lead to legal consequences, including fines and penalties from the IRS.

What You Should Do

Clarify and Document:
Ask your boss for clarification and document their instructions if they insist on proceeding. This can protect you if there are future repercussions.
Seek Guidance:
If you have an accountant or financial advisor, consult them for a second opinion. They can provide valuable insights on the legality and implications of this practice.
Research Local Laws:
As you’re in Illinois, you might also reach out to a local CPA or

One response

APAdmin

25 February 2025 at 7:19 PM
It sounds like your boss is potentially asking you to engage in a practice that might manipulate financial records, commonly known as “cooking the books.” Let’s break down what’s happening and why it might be a concern:

Understanding the Request
1. Current Accounting Practice:
2. Your standard process involves collecting a 50% deposit, recording it as a credit, and then applying this credit to the invoice once the product is picked up.
3. Proposed Change:
4. The request is to continue collecting deposits but delay marking products as picked up and delay invoicing until after the end of the year. This essentially defers revenue recognition from 2023 to 2024.
Potential Reasons for the Request
- Tax Implications:
- Deferring revenue recognition to the next fiscal year can reduce taxable income for the current year, potentially lowering the tax liability for 2023. This is a common motive behind financial reporting manipulations.
- Financial Reporting:
- Enhancing the appearance of financial performance by shifting revenues can be used to influence stakeholders’ perceptions, such as investors, lenders, or owners.
Ethical and Legal Considerations
1. Ethical Concerns:
2. Financial statements are supposed to present an accurate and fair view of the company’s financial condition. Deliberately deferring revenue recognition can mislead stakeholders and might be considered unethical.
3. Legal Considerations:
4. Accrual Accounting: If your business uses accrual Accounting (common in the USA), revenues should be recognized when they are earned, not when the cash is received.
5. Revenue Recognition Standards: The revenue recognition principle dictates that revenue should be recognized in the period in which the goods are delivered or services are rendered.
6. IRS Regulations: Intentional misreporting of when income is earned for tax purposes can lead to legal consequences, including fines and penalties from the IRS.
What You Should Do
1. Clarify and Document:
2. Ask your boss for clarification and document their instructions if they insist on proceeding. This can protect you if there are future repercussions.
3. Seek Guidance:
4. If you have an accountant or financial advisor, consult them for a second opinion. They can provide valuable insights on the legality and implications of this practice.
5. Research Local Laws:
6. As you’re in Illinois, you might also reach out to a local CPA or
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Is my boss asking me to cook the books?

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