Creative accounting refers to the use of accounting techniques that may follow the letter of the law but deviate from its spirit. This practice often involves manipulating financial statements to present a more favorable picture of a company's financial health. While it can help businesses appear more profitable or stable, it can mislead investors and stakeholders. The term is often associated with practices like earnings management and off-balance-sheet financing. Although creative accounting is not illegal, it raises ethical concerns and can lead to significant consequences if discovered, including loss of reputation and legal penalties for the company and its executives.