Assume that you are the controller of a business that provides legal services to clients.Suppose that the company has had a tough year, so the revenues have been lagging behind, based on previous years standards.

What would you do if your boss (the chief executive officer [CEO] of the company) asked to reclassify a transaction to report loan proceeds of $150,000 as if the cash came from service fee revenue from clients instead.

Would following the CEOs advice impact the companys accounting equation?

How would reclassifying this one transaction change the outcome of the balance sheet, the income statement, and the statement of retained earnings?