Can someone tell me how to figure this out? I am so lost when it comes to accounting.

The net income of Simon and Hobbs, a department store, decreased sharply during 2000. Carol Simon, owner of the store, anticipates the need for a bank loan in 2001. Late in 2000, Simon instructs the store's accountant to record a $10,000 sale of furniture to the Simon family, even though the goods will not be shipped from the manufacturer until January 2001. Simon also tells the accountant not to make the following December 31, 2000 adjusting entries:

Salaries owed to employees: $900
Prepaid insurance that has expired: $400
Why is Simon taking this action? Is her action ethical? Give your reason, identifying the parties helped and the parties harmed by Simon's action.

To understand why Simon is taking this action and whether it is ethical or not, we need to analyze the situation. In this case, Simon instructs the store's accountant to record a sale of $10,000 furniture to the Simon family, even though the goods will not be shipped until January 2001. Furthermore, Simon tells the accountant not to make certain adjusting entries on December 31, 2000.

The reason for Simon's action could be to increase the net income for the year 2000, thereby creating a more positive financial position for the business. By recording a sale that has not yet occurred, Simon is inflating the revenue for the year, which may give a more favorable perception of the business's performance.

However, this action can be considered unethical. Ethical accounting practices require accurate and transparent reporting of financial information. Recording a sale that has not yet happened and intentionally neglecting adjusting entries violate the principle of fair representation and misleads stakeholders, such as investors, lenders, and employees, who rely on the financial statements for decision-making.

Identifying the parties helped by Simon's actions:
1. Carol Simon (owner): Inflating the net income creates a positive perception of the business's financial performance, which may benefit Simon by making it easier to obtain a bank loan.

Identifying the parties harmed by Simon's actions:
1. Lenders or potential lenders: If the bank loan is approved based on the inflated financial figures, the lenders may have a distorted view of the store's actual financial position, leading to increased credit risk.
2. Investors: If investors rely on the financial statements to make investment decisions, they may base their judgments on inaccurate information, potentially leading to poor investment choices.
3. Employees: Failing to record salaries owed to employees can impact their rights and compensation. Without proper recording, employees might not receive the full amount they are owed.
4. Other stakeholders: Any party that relies on accurate and transparent financial information to make decisions or assess the store's financial health can be harmed, as they are given a false understanding of the actual situation.

In summary, Simon's action of recording a sale that has not yet occurred and ignoring necessary adjusting entries is unethical as it misrepresents the store's financial position. It could potentially harm lenders, investors, employees, and other stakeholders who rely on accurate financial information.