Financial vs. Taxes
Keeping two sets of books in accounting alludes to the practice of trying to disguise or hide certain business transactions from being accessed by outsiders (tax authority). This is by having fraudulent accounting books (records) sets for official work and the private record’s actual set. In this case, the two books’ sets are for financial and taxes purpose. This paper explains Rita’s suggestion on keeping two sets of books for Nolan and Stacy.
Certified Public Accountant would have the first books’ set, and the books set would serve as elementary for filling tax, for example, it would reflect the accuracy of revenues and expenses. On the other hand, the other books contain items of the exact person/private transaction, for example, extraordinary deemed revenue, and expenses that are related to owner. The main reason for keeping the second book set is to eradicate expenses and show firms’ actual state. It is advisable that the second books’ set must be kept safe under lock and never, at any circumstance, be confused with the ‘actual’ set of books (Gasparin et al., 2021).
Keeping the second books’ set comes with challenges that have consequences to the company. The firm’s consequences will be if someone mistakenly uses the second book’ set to declare the firm’s income to the federal, state, or tax authority. It will bring problems when the firm has under-reported sales (extraordinary sales) and in overstated personal expenses. The tax authority will be after the firm, and the question the tax authority would be asking, why the second set of books? The assumption would be that something fishy is going on, and explaining to the tax authorities would be much hustle.
To sum up, keeping the second books’ set have disadvantage and advantage as results. The advantage of keeping the second set of books is to know the sate of the business. To avoid the disadvantage, one must not confuse the ‘real’ books and the second books’ set when declaring the tax income. Nevertheless, if the idea is not pleasing, please try not; after all, it was just a suggestion.
Reference
Gasparin, M., Green, W., Lilley, S., Quinn, M., Saren, M., & Schinckus, C. (2021). Business as unusual: A business model for social innovation. Journal of Business Research, 125, 698-709.