Creative Accounting Practice - Make or Mar Profit

Abstract

The study looks at creative accounting practices in Nigeria with specific emphasis on its role in improving profit or otherwise. Like the tax avoidance, creative accounting, though lawful, is unethical. Though the practice often keeps companies afloat, their financial positions remain very unhealthy, with the consequences of a sudden failure, as the concept of "true and fair" is compromised. From the literature reviewed, it was discovered that managers use various creative accounting dimensions of income overstating, inventory manipulation, bad debt understatement, liabilities understating, and depreciation underreporting to manipulate the accounting figures at the detriment of the shareholders for their selfish gain. The study concluded that creative accounting improved profitability in the short run while enhancing an organisation's overall survival and ongoing concern. Thus, there is an urgent need to curb these practices with a robust legislative act that will make them unlawful by establishing a new policy framework. By intensifying its supervisory roles, NDIC and Apex Bank must strictly comply with revenue, inventory valuation, and asset depreciation accounting policies.