Persons W and M, shareholders of firm C, filed a law suit against other shareholders MH and K and accountant J for breach of duty. Persons W and M claimed that accountant J acted on behalf of MH and K and caused disadvantages to them. It was alleged that J had purposely altered the books of firm C to increase the financial liabilities of W and M. To find: The duty of J towards W and M.

Question

On 10/6/2024, company A sells goods to Customer C for €20,000 with an agreed credit of two months. On 31/12/2024, in the context of investigating the collectability of its receivables, the company estimates that it will only collect €10,000 from customer C and forms a provision for doubtful debts for the remaining amount. Finally, on 30/3/2025, company A receives from customer C the amount of: a. €9,000 b. €11,000. You are requested to comment on the impact of the above collection cases a. 9000 b. 11,000 on the income statement for fiscal year 2025, justifying your position.

Answer 1

Question

Chapter 19, Problem 4BCP

Summary Introduction

Case summary: Persons W and M, shareholders of firm C, filed a law suit against other shareholders MH and K and accountant J for breach of duty. Persons W and M claimed that accountant J acted on behalf of MH and K and caused disadvantages to them. It was alleged that J had purposely altered the books of firm C to increase the financial liabilities of W and M.

To find:The duty of J towards W and M.

Summary Introduction

Case summary: Persons W and M, shareholders of the firm C, filed a law suit against other shareholders MH and K and accountant J for breach of duty. Persons W and M claimed that accountant J acted on behalf of MH and K and caused disadvantages to them. It was alleged that J had purposely altered the books of firm C to increase the financial liabilities of W and M.

To find:The possibility of the breach of duty by person J.

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On 10/6/2024, company A sells goods to Customer C for €20,000 with an agreed credit of two months. On 31/12/2024, in the context of investigating the collectability of its receivables, the company estimates that it will only collect €10,000 from customer C and forms a provision for doubtful debts for the remaining amount. Finally, on 30/3/2025, company A receives from customer C the amount of: a. €9,000 b. €11,000. You are requested to comment on the impact of the above collection cases a. 9000 b. 11,000 on the income statement for fiscal year 2025, justifying your position.

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