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Cal Ben's books and records were maintained and Cal Ben's
partnership tax returns were filed using a hybrid method of
accounting under which the accrual method of accounting was used
to account for purchases and sales of Cal Ben's inventory of soap
products, and the cash method of accounting was used to account
for other miscellaneous items of income and for Cal Ben's general
business expenses. Cal Ben's general business expenses were
recorded on a cash basis in a cash disbursements journal.
From 1955 through 1987, petitioner Barbara Schachter and
Marcia Karp, David Karp’s wife, maintained on a part-time basis
the books and records of Cal Ben. In January of 1987, a full-
time bookkeeper was hired and assumed bookkeeping
responsibilities for Cal Ben.
Purchase orders from Cal Ben’s customers for soap products
generally were received in the offices of Cal Ben over the
telephone. Whoever received the telephone purchase orders
prepared for each order a sales invoice. A copy of each sales
invoice was sent to Cal Ben's warehouse to have the order filled.
A copy of each sales invoice was sent to the customers along with
the merchandise, and the original of each sales invoice was given
to petitioner.
After reviewing sales invoices, petitioner generally would
forward the invoices to Cal Ben's bookkeepers. Upon receipt of
sales invoices from petitioner, the bookkeepers recorded
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Last modified: May 25, 2011