Question: Mason owns and operates a pharmacy as a sole proprietor

Mason owns and operates a pharmacy as a sole proprietor. He manages to compete with the national chains because of the personalized service he provides to his customers. Mason also maintains a large and varied assortment of medical equipment and supplies (e.g., wheelchairs, walkers, and bath aids).
Mason uses the cash method of accounting, and he immediately deducts all pur chases of goods for resale. He sees no need to keep inventory accounts, as it "all washes out" over time-last year's ending inventory becoming this year's beginning inventory.
Thus, any misstatement of income in one year is offset in the following year.
Comment on Mason's rationalization and the propriety of his approach.

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  • CreatedMay 25, 2015
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