What is Accounting Cushion?
Accounting cushion refers to the extra amount of expenses that are reported in a company’s financial statement during a reporting period. Accounting cushions help to create provisions for expenses.
Benefits of Accounting Cushion
- It helps to attract investors.
- Helps to minimize larger expenses by creating provisions.
- Reduces taxable income of the company.
- Helps to offset some of the actual liability that occurs in the future.
An accounting cushion helps to mitigate financial risks by making earnings less fluctuating. Though this method is not harmful it’s still misleading to investors.