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    #1

    C-Corp question

    I did the accounting for an auto dealership in 2007, and they had signifigant errors in the auto dealer management software (which reported the sales, sales tax, value of trades, etc) as well as an employee who was skimming cash from the deposits. Due to these factors, I reconstructed the books for the entire year based on the bank and credit card statements, as well as the documents from the floorplan company through which they financed their inventory.

    The question is, when I redid the books, the only reasonable way was to use the cash method for each month, and at the end of the year create the accruals. In the process of this, items like sales tax paid by customers got lumped into gross sales. I have deducted it on the return on "other deductions" and explained it as "Tax collected from customers and remitted to the state, but included in gross sales" I have a couple items like this. Would I be better to do all this netting outside the return, use the net numbers, and keep good detail in all my workpapers? Thanks!
    "Congress has spoken to this issue through its audible silence."
    Anyone ever notice they beat the daylights out of the definition of a child, but they don't spend much time at all defining "parent"?
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    #2
    Might be better to report it on line 17 of the 1120 under "Taxes and Licenses".

    Comment

      #3
      Your method would be taking a deduction from sales (bank deposits) for the money stolen by the employees. What did the company do to get the money back?

      I never like to include in sales any sales tax collected. I treat ST collected as a current liability and debit the payments to that same account. This method is true double entry bookkeeping, especially for 1120s in this type of business. Including ST in sales will distort gross profit %.
      This post is for discussion purposes only and should be verified with other sources before actual use.

      Many times I post additional info on the post, Click on "message board" for updated content.

      Comment

        #4
        Well

        The $$ stolen by the employee were impossible to quantify since there was a complete lack of internal control, so I suppose the way we're reporting it now, we may be underreporting gross reciepts by the amount of $ stolen. That's an excellent point.

        I'll take a look at line 17. I ususally to treat it the way it should be done (Accrue liability, pay liability) but with the poor records of the company, it's going to be tough to be entirely certain.

        Any thoughts on how to protect myself against any preparer penalties if the whole thing comes down? The company is insolvent and the stock holders are taking a 1244 loss for 07. Thank heavens, this thing is caput.
        "Congress has spoken to this issue through its audible silence."
        Anyone ever notice they beat the daylights out of the definition of a child, but they don't spend much time at all defining "parent"?

        Comment

          #5
          Since this corp is being finalized, do the best that is available and close it down with minimal effort and leave the rest to faith. This problem is not your's and faith will more than likely let is die without any problems...................
          This post is for discussion purposes only and should be verified with other sources before actual use.

          Many times I post additional info on the post, Click on "message board" for updated content.

          Comment

            #6
            Sales tax

            is not properly included in sales. I know, some people do it and then deduct it down below.

            Remember too the sales tax discounts which are not remitted to the state; these are
            properly other income.
            ChEAr$,
            Harlan Lunsford, EA n LA

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