You are employed as a graduate accountant in a mid-tier accounting firm.  One of the partners has asked you to review the following cases, where a client has violated at least one of the assumptions, concepts or definitions you studied at university.  The partner has asked for a written report in your own words (using references where appropriate), to please explain:

a)    which concept or assumption has been violated, and;
b)    what the correct treatment should be.


i.    Carmel’s business has $35,000 of outstanding debtors on its books, and she is quite certain that $4,000 of this debt will prove impossible to collect. Carmel has instructed the accountant at your firm to make no adjustments to the ledger and the reports since “they’re still our debts and therefore still assets of this business.”    [5 marks]

Read less