Financial Accounting

Brady Dumais owns a small restaurant that operates on a cash-only basis; no credit cards are accepted. Brady has taken a bookkeeping course and a tax preparation course. With the help of his spouse, he is able to perform all the bookkeeping duties and prepare his tax returns.

Brady discovers that federal and state income taxes take away 35 percent of his profits. Because his is a cash business, Brady has started the practice of “skimming” sales. Because these sales will not appear in the business records, they will escape taxation, and Brady will be able to retain 100 percent of these revenue dollars.

1. Identify the stakeholders in this case.
2. Comment on the legal and ethical issues involved in skimming.
3. If you were aware of this activity on your business, how would you address it?