Hoffman Discount Drugs, Inc Essay Example

Of the three alternatives, the second alternatives has the revenue earned before year end and would be in accordance with GAAP as long as Excello also recognizes their liability to purchase a product from Data Systems.

The first offer, it is not ethical if we record the revenue too soon because the earning process has not been completed and the conditional exchange still valid. We cannot record the revenue until the product would be exchange. For the third offer, as we know the revenue cannot recognized in the current year. Means that, the actual amount of revenue do not recorded. It is also unethical if we record the revenue since we know the deadline for the full credit is in the next year. We should strive with the virtue perspective such as honesty, objectivity and trustworthiness in recording the revenue.

Honesty requires that the statements should be truthful and recognize revenue using generally accepted accounting principles. Objectivity requires that the company should approach its decision about the proper revenue recognition procedure with fair-mindedness and without partially to one set of stakeholders. Trustworthiness means that the accountants should not violate the investors’ faith that the statements are accurate and reliable. Other than that, to make a decision we should consider the greatest good for the greatest number of stakeholders.