What is cooking books?
Cooking books is an act of falsifying financial information about the company. This can be done to avoid paying taxes or maintaining investors happy and stock -growing prices, or alternately can cook books to draw new investors or get loans. The term results from the alternative meaning of the verb to cook , which is no longer used in English. It could be roughly translated in terms of deception or mislead, or serve false information. The term creative accounting can be used as a synonym for cooking books. One is to show losses that do not really exist to use tax relief. This practice deliberately shows less profitable or direct losses that are not the exact representation of the true state of the company's financial matters. This is done to qualify for tax relief or avoid a larger tax share. However, companies do not want to publish losses more often. They want to show a tallKé revenue and profits for investors to remain determined by their society. If this is the case, they can practice cooking books the purpose of changing financial accounts to show that the company works much better than it really is. There are a number of ways to practice cooking books to maintain high investors' confidence.
Until 2002, certain methods were allowed to help companies to practice booking books without doing something illegal. One method was to use accounting out of balance. Companies could use money in a certain way that might not be recorded in the financial statements. In some cases, debts may be out of balance or are not listed on the financial statements by creating what is called the Entities of the Special Purpose (SPE), in fact, a new company -insisted by the parent company.
SPES enabled parent companies uninterestedamenat part of the debt owed as a company because this debt belonged to a "new company". In this way, the debt could be closed to SPE outside the balance and has not been recorded on the financial records of the parent company. Alternatively, the parent company could train part of its debt to SPE so that its profits to the debt ratio would seem greater than it really was. This was previously legal, but is now prohibited by passing the US law Sarbanes-Oxley from 2002, which requires greater transparency in financial reporting.
Other methods of cooking books include a simple but illegal act of changing profits/loss of statements in boldly face real characters and claim to be better or worse than they are. Other occurrences include counting money intended for retirement in as part of assets to settle large debts, counting in stocks that have already been sold but not sent as part of assets or recording of additional expenditure (and in fact) to increaseCustomer trust, even if the company can afford these other expenses.
Many of these "creative accounting" methods have now been illegal since 2002 and some have been illegal much longer. These are practiced fraud methods aimed at creating a financial portrait of a company that is false. Yet there are many large companies that have created books of books part of their financial practice. In many cases, they are caught, and if the practice is long -term, they cannot simply claim administrative errors. Although it might be tempting to try creative accounting, it is usually an illegal, criminal law and unfair to those who could invest in society or government because it expects and depends on the fact that companies pay their fair share in tax profits.