Question

After being employed. During the operating period, it has been noticed that there happened to be shrinkage to its inventory. Some music plus was missing. Of course, it’s the liability of the securities. They didn’t take their accountability enough. So the security should pay for it. Big shareholder named Mr. Madson sent his curious that there is shrinkage while there is nothing to do with the income statement. If you are an accountant, please send a communication letter to Mr. Madson and explain the reason.

please help me with this question

Answer 1

06th December 2019

Dear Mr. Madson,

Hope you're doing good, I'm Ravindra Lawson, Accountant of our company Pleasant music systems, as you are aware that there is shrinkage in the inventory due to theft on 3rd december 2019, causing loss of 10 music plus systems. this shrinkage happened due to the irresponsibility of the security person who is on duty 2nd december 2019, as per our surveillance systems we came to know that he had slept and being unconscious at the time of the shrinkage.

To quantify the shrinkage loss in revenue terms amounting US $ 15000. I am here by reproducing the terms of the agreement that the company had with the security agency, any loss will be made good by the security agency.

Further to note that, we have communicated the the occurrence of the shrinkage and extent of loss in revenue terms immediately after occurrence event to the security agency. Mr. Danial Lenin, the claims and disbursements personnel will provide for the amount of loss once they get clear with their formalities.

Further, from financial terms there will not be any adverse effect in the income statement. Now we made a provision in our books of accounts to the extent of loss of US$ 15000, once we receive amount the same will be reversed. so, the loss due to shrinkage gets nullified.

In order to prevent these type of events in mere future we shall amend the terms of the security agency to increase transparency and accountability.

Further clarification regarding the same will entertained promptly.

Sincerely,

Ravindra Lawson,

Accountant,

Pleasant music systems.