A Loan for a SaleThe case of Enron's fraudulent dealings with the banking company Merill Lynch turns out to be a perfect example of how loans are used to boost sales then that in fact, they technically aren't. sales. In 2004, the “Nigerian barge” transaction took place: Enron sold electricity-producing barges to Merill Lynch. A huge sale as recorded by company executives, but it turns out that it was actually a loan rather than a sale and that Enron did not actually profit from the transaction, hence the investigations by the Securities and Exchange Commission in 2004. Perhaps the big question arises. The answer in this essay is: Why is the transaction considered a loan rather than a sale? And if it was a loan, what impact would that have on the company's financial statements? First of all, it is important to define what a loan is in order to differentiate it from a sale. A loan is a transaction between two entities that involves the delivery of an item. to the other party which will be used free of charge and will be returned at an agreed time, either in the form of the exact item or in a different form equivalent to the value of the item (Oxford Dictionaries, n.d.). According to the definition, a loan exists or a lending relationship exists if both of these elements are present: a monetary debt and a money lending transaction. It is also important to note that a loan always involves a repayment set at a future time which may or may not involve the payment of interest (HM Revenue and Customs, nd, para.4). On the other hand, a sale is defined as a transaction in which property is transferred from one person to another in consideration of a sum of money or its equivalent paid to the owner of the property or product (The Law Dictionary, nd) . So a sale is middle of paper......a repurchase should have been listed under cash flow from investing and financing respectively and not under operating activities. This deliberate effort to label this way is a move by the company to mislead the public and analysts, giving the impression that the company is doing well, meeting its goals and generating huge profits from its operations. References: Investopedia (nd). Definition of guarantees. Accessed April 4, 2014 from http://www.investopedia.comHM Revenue and Customs. Definition of loan. Retrieved April 4, 2014 from http://www.hrmc.gov.ukLibby, R., Libby, P. and Short, D. (2009). Financial Accounting (6th ed.). Boston: McGraw-Hill Irwin. Oxford Dictionaries (nd). Definition of loan. Retrieved April 4, 2014 from http://www.oxforddictionaries.com/usThe Law Dictionary (nd). Legal definitions. Retrieved April 4, 2014 from http://thelawdictionary.org