As the staff accountant for Gil’s Plumbing, you notice that a $1,000 check is drawn (payable to “Cash”) on the third Monday of each month and is charged to miscellaneous expenses. You also notice that a sleazy character with a canvas bag comes into the office on the third Tuesday of each month for a 30-second meeting with Gil. After inquiring about what the $1,000 check is for and to which account it might more properly be charged, Gil suggests that you should

“mind your own business”and just record the expenses where you are told.

Required

a. What would you guess is really happening in this situation?

b. Is the $1,000 properly recorded in Gil’s accounts? Why?

c. Is this a personal transaction or a business transaction?

d. Since Gil is the sole owner of the plumbing business, can he do whatever he wants with his money? How would this situation differ if Gil were merely the manager who was making these payments without the owner’s knowledge? What should you do in this case? Why? p-968