Jim Peterson is the accountant for ProCare Lawnservice, Inc. During the month, numerous payments were made for wages for which he was properly debiting the Wage Expense account and crediting Cash. Jim became concerned that if he kept debiting the Wage Expense account it would end up with a balance much higher than any of the other expense accounts. Accordingly, he began debiting other expense accounts for some of the wage payments and thus, “spread the expenses around” to other expense accounts. When he was done posting all the journal entries to the ledger accounts, he printed a trial balance. He saw that the Wage Expense debit balance was $38,000 and the total of all the other expense accounts was $24,000. Had he properly posted all the wage expense transactions, Wage Expense would have totaled $52,000 and the other expense accounts would have totaled $10,000. Jim reasoned that his actions provided for “more balanced” expense account totals and, regardless of his postings, the total expenses were still $62,000, so the overall net income would be the same.
Were Jim’s actions justified? Do they cause any ethical concerns? If you were the owner of ProCare Lawnservice, Inc., would you have a problem with what Jim did?

  • CreatedApril 29, 2014
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