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Mr. Lee managed Hamalee's warehouse operation, reviewed its
accounting records and receipts, monitored its purchase and sales
orders, collected its receivables, effectuated its banking
transactions, and signed all of Hamalee's tax returns. Mrs. Lee
dealt with Hamalee's customers, took its sales orders, checked
its deliveries, collected and accounted for moneys received by
its delivery people, and helped manage its financial records.
Mrs. Lee and Ms. Chong maintained Hamalee's accounting records
and receipts. Mr. Lee and Mrs. Lee were the only individuals
authorized to sign checks for Hamalee.
Hamalee's purchases, sales, and payables were primarily
transacted in cash. Hamalee kept its business records in two
separate sets of books. The first set (the actual books)
contained all of Hamalee's sales, listing each sale in
chronological order and referencing whether each sale was paid in
cash or by check. The second set (the tax books) showed all of
Hamalee's sales that were paid by check and some of the sales
that were paid in cash. Entries in the tax books, which were the
only books provided to the preparers of Hamalee's tax returns,
were the only sales reported for tax purposes. Entries in the
tax books were underlined in red ink in the actual books, and an
invoice number was handwritten in the actual books next to each
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Last modified: May 25, 2011