Hi -

The owner of my company goes to the caribbean - he comes back and tells me an account paid him cash and I should "credit" the account -

He wants me to issue a credit memo (but don't put "cash received" on it)

I want to show it for what it really is - a cash payment on account, not a credit for discount, returns, shortages, price differences, etc - and I don't want to get fired or in trouble with the IRS

Is issuing and posting a credit instead of showing CASH received LEGAL and an accepted bookkeeping / accounting method?

Thanks
Howard

I think I'm a little lost here, but maybe cause it sounds like your boss is trying not to show that money was ever received, but my brain has a hard time thinking that way case I'm sometimes too honest even for my own good. So maybe I'm not picking up on this right.

So he got the cash, right? And you're supposed to record the cash and then credit the receivable because they don't owe you anymore. But your boss wants you to record it as a credit memo? As in, it'll net against the income for being credited. And the receivable will be correct because this customer doesn't owe anymore.

So... legal? Well, it's reducing income by taking the "credit" off the revenues. No, that's not right. Not when it's knowingly done. (As opposed to accidental screw-up.) It'll result in less taxes. And certainly not correct by accounting rules. The IRS doesn't particularly like it when people knowingly don't report income -- it's called fraud.

If I'm interpreting this correctly, no this isn't right and your boss is a jerk. Does your boss realize he's cheating? You can try to politely explain -- some people don't take this stuff very seriously and just shrug it off like it's no big deal. If it's a small amount, really, it's probably not going to be a big deal, but I hate doing things incorrectly on the books, and don't want to be a party to it. (People like to make accountants responsible, you know. :)) If he gets nasty about it, I guess you have to make the choice of whether you want to work for someone dishonest like that, or whether you want your job. I don't like working for people like that, but I also understand that sometimes you just have to keep your job cause you have to put bread on the table, right?

As for the IRS, as the employee you aren't responsible. You're doing what you've been instructed to do. So don't worry about it from that point of view. Assuming they ever find out, your boss is responsible.

Hi morgaine300 -
You are absolutely correct in your summation - he IS trying to hide the income - last year this amounted to about $50,000 - this year, unbeknownst to him, I set up a new bank account internally (in the computer only) and called it "cash to XYZ" - instead of issuing a credit memo - I now post the cash as a receivable to this "bank" - this helps ME distinguish and account for the difference between "real" credit memos and his disappearing cash and it reduces the receivables so the balances are correct - the problem is, if and when he decides to run reports on the numerous bank accounts we have and/or decides to look at the history of any particular account, he will discover that I had NOT in fact posted a credit as instructed to do, but instead posted a cash receivable (to a bank that really doesn't exist accept for bookkeeping purposes) - I wanted to know that he if then objects and decides to fire me, that I have an excellent lawsuit - being fired to not engaging in illegally hiding income!

That is adding up to a pretty big amount. If this were me, I'd be more worrying about the fact that it's being done rather than a lawsuit if you get fired. I'm not a lawyer (and hope to never be one), but I'm not sure this is so much about a lawsuit. The very fact that you're keeping track of it is in a way like helping him hide it. You are hiding the income. I think you'd almost have less issue (for yourself) if you just did what he told you.

I think you're getting into a sticky situation with this guy, and I'm going to suggest that you post this on one of the law forums. You should be able to just post the link to this thread and let them read it.