Essay on Why Ethics Is Important Role By The Creditor And The Debtor

907 Words Nov 22nd, 2016 4 Pages
According to the principles of accounting course, accounts receivable occurs when a customer purchases goods or services and promises to pay for them in the future. This helps consumers receive goods when they may not have the funds to purchase them, creating an account receivable, or when they cannot afford the whole amount upfront and want to make payments they create a note receivable, which usually accrues interest. When it comes to the business side, granting credit helps increase sales, but it could also lead to a write-off because a customer did not pay. Furthermore, this is why ethics plays an important role by the creditor and the debtor. According to my accounting course, ethics is “a code of conduct or set of beliefs that dictate what is right, wrong, fair, and unfair” (Ethics - Definition | Meaning | Example, n.d.). In addition, these codes and beliefs need to be applied equally. It is important to understand why ethics is so important in receivables and what could happen when it is not applied properly on the business side and the consumer side.
When it comes to applying ethics on the business side, they have rules and guidelines to follow, known as the generally accepted accounting principles or GAAP. For example, Congress passed the Sarbanes-Oxley Act that requires companies to look over their internal control and to take responsibility for their financial reports (Nobles, Mattison, Matsumura, & Horngren, 2014, p. 375). When it comes to the business side of…

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