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responsible for performing financial and bookkeeping duties. He
also wrote checks to suppliers. Mr. McGirl was responsible for
providing information to the Yogurt Station's accountant so that
he could prepare the corporate income and sales tax returns.
Petitioners used a cash register at the Yogurt Station that
recorded sales on a paper tape. Mrs. McGirl used the cash
register tape to tally gross sales on a daily basis. The cash
register had a functioning "X" key that tallied daily sales when
punched. Petitioners received invoices in connection with many
of their purchases; they recorded the particular invoice numbers
on many of the checks used to pay for the purchases. Petitioners
did not prepare, maintain, or have a professional prepare any
accounting ledgers, spreadsheets, or similar items in connection
with operating the Yogurt Station.
During the years at issue, the Yogurt Station maintained a
checking account (the business checking account) at Cherokee
State Bank in St. Paul, Minnesota. Some of the checks written on
the business checking account during the years at issue were for
personal expenditures. The total deposits to the business
checking account for the years 1989, 1990, and 1991 were
$126,464.21, $146,054.76, and $153,080.77, respectively. The
parties agree that, with the exception of certain amounts claimed
by petitioners to be loan proceeds, the total deposits to the
business checking account for the years at issue are gross
receipts of the Yogurt Station.
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