Chapter 3 Blog

http://www.nationalpost.com/news/world/story.html?id=1039765

Summary

Who ever said that crime doesn’t pay? Just recently on December 6th, four men went into the Harry Winston jewellery store in Paris and made off with $137 million in stolen merchandise. The men went into the jewellery store with concealed weapons and were also disguised. Paris police are saying that this was a very well organized and unfortunately, very successful mission as the four men easily walked in, and walked out with a bags full of “merchandise”. This is not the first time that the shop was robbed, as it suffered a loss of $16 million just over a year ago.

Connections

The connection to chapter 3 is found in the accounting cycle. Even though this was not a conventional transaction, it still has to be recorded as if it was. The jewellery is a permanent account and will be part of the accounting done during the accounting cycle. This means that the transaction will be posted, journalized, put in the ledger, and will be subject to all the steps after that. As a result, there will be a major decrease in shareholder equity, seeing as $137 million of merchandise is no longer part of the company, and nothing was given back to the company in order to complete, and balance out the equation.

Reflection

The accounting cycle is here for us to use as a tool to make sure that all transaction are on the record and can be referred back to at any time. This is a great way to make sure that accounting stays legitimate, especially for shareholders or potential buyers in a company. If the accounting cycle was altered or disregarded completely, then a company could do whatever it wants to make sure that it remains attractive in the eyes of and investor. Take the robbery for example, what stops the accountants from posting this entire ordeal as a legitimate transaction? If this were done, then people would look at this company thinking that they not only make expensive jewellery, but also their product is in demand since they just made a $137 million deal. Who would the real thieves be then?

C. Tut
FINAC12
Block A