- 20 - amounts upon which respondent's adjustments are based. Further, petitioner's bookkeeper computed the payables by totaling bills that were due. The payables did not include expenses that may have properly accrued under the regulations but for which petitioner had not yet been billed. Additionally, "No method of accounting will be regarded as clearly reflecting income unless all items of gross profit and deductions are treated with consistency from year to year." Sec. 1.446-1(c)(2)(ii), Income Tax Regs. In this case, respondent did not treat petitioner's accounts payable with consistency. The accounts payable of $98,584 at the beginning of the taxable year included all accounts payable ($86,334) plus all salaries and wages payable ($12,500) reflected on the balance sheet for the taxable year ending May 31, 1990. The accounts payable of $20,120 for the close of the taxable year included only those payables identified as payables related to the cost of goods sold and did not include $5,111 in accounts payable not related to the cost of goods sold or $11,250 in salaries and wages payable to Mr. Asher. Respondent made no adjustments to account for accounts payable at the end of the taxable year related to the $5,111 of operating expenses or related to the $11,250 of salaries and wages payable. Respondent's adjustment of these items was improper. In order to clearly reflect petitioner's income, accounts payable at thePage: Previous 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Next
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