Creative accounting - is it legal or illegal?

Accounting is the language of business. Accounting is the recording of financial transactions plus storing, sorting, retrieving, summarizing, and presenting the information in various reports and analyses. Accounting is instrumental within organizations as a means of determining financial stability. Accountants are responsible for determining an organization’s overall wealth, profitability, and liquidity. Without accounting, organizations would have no basis or foundation upon which daily and long-term decisions could be made. Accounting is also a profession consisting of individuals having the formal education to carry out these tasks. One part of accounting focuses on presenting the information in the form of general-purpose financial statements such as income statement and balance sheet to people outside of the company ie. stakeholders. Another part of accounting involves compliance with government regulations pertaining to income tax reporting. Accounting is both an essential practice and a vital profession in the economically developed world of today. The term 'creative accounting' can be defined in a number of ways. Initially we will offer this definition: 'a process whereby accountants use their knowledge of accounting rules to manipulate the figures reported in the accounts of a business'. Creative accounting means using the flexibility within accounting to manage the measurement and presentation of the accounts so that they serve the interests of preparers. With increasing hard economic times, companies may be motivated to practice creative accounting for diverse reasons. Players in the accounting profession may not fully understand the operations of creative accounting because different companies practice creative accounting for different reasons. This paper examines the various aspects pertaining to creative accounting and ultimately find out whether the creative accounting is legal or illegal.?