The
accounting entry
After
the money was successfully transferred, the problem faced
was the accounting entry. As they had to credit cash (money
going out from the company i.e. the RM45 million), they
needed to debit something in the accounting books to show
that the cash was used to pay for some deals and that
the books would be balanced.
To
cover up the irregular payments, the two directors created
a plan for PLC A to enter into a joint-venture agreement
with a private company i.e. M Sdn Bhd in which Mr X
was the company secretary. This joint-venture agreement
involved M Sdn Bhd developing a piece of land and the
three cheques worth RM45 million issued previously were
then deemed as advances paid to the joint-venture company
to finance the development project. This somehow took
care of the debit entry of PLC A’s accounting
books where the RM45 million was recorded as “advances”
to the joint-venture entity. Knowing for a fact that
these “advances” would never be recovered
and keeping it in the books for too long may attract
attention, both Mr X and Mr Y devised another plan to
write off the advances made to M Sdn Bhd within a year.
In
summary, the siphoning of the RM45 million was recorded
in PLC A’s accounting books as follows:
| Financial
Statements of PLC A for the year ended September
2000 |
| Balance
sheet |
When
the advances were created:· Debit asset (“Other
Debtors”) as advances to joint-venture company·
Credit asset (“Cash”)When writing off
the advances:· Credit asset (“Other
Debtors) as advances to joint-venture company |
| Income
statement |
Debit
“Provision for doubtful debts” |
|
