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the customer's insurance
company. In several cases, supplemental work was required afterwards, which
meant that a separate repair order was prepared. During the last month of the
year, the taxpayer would record the initial income as stated on the original repair
orders but would ignore the supplemental payments. They would record those as
income when the supplemental payments were received. A comparison of the year
ending cash receipts journal with the subsequent year's cash receipt journal
often revealed the same customer names. When questioned about why the
supplemental payments were not recorded with the original repair order, the
taxpayer responded that supplemental payments were not assured of being paid.
(In this case, the supplemental payments were almost 100 percent guaranteed of
being paid since the insurance companies approved them in the first place.) In
this situation, the accrual basis taxpayer should have recorded the entire sale
since all work was completed. Although this is essentially a timing difference, this can
result in a significant adjustment in the first taxable year corrected. INVENTORIES See Cost of Sales Section for discussion of
inventories. BUILDING AND OTHER DEPRECIABLE ASSETS
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