Accounting for the Proper Entity You have been hired to prepare the financial reports for White River Building Supply, a proprietorship owned by Bill Masters. Upon encountering several payments made from the company bank account to a nearby university, you contact Bill Masters to find out how to classify these payments. Masters explains that those checks were written to pay his daughter’s tuition and to purchase her textbooks and miscellaneous supplies. He then tells you to include the payments with other expenses of the business. “This way,” he explains, “I can deduct the payments on my tax return. Why not, since it all comes out of the same pocket?”

How would you respond to Masters?